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.
Nearly five years of conflict in Yemen have created a humanitarian catastrophe that has brought the country to the brink of famine. The economy has collapsed and fighting has ravaged the country’s infrastructure. The reconstruction and recovery of Yemen will demand rebuilding the economy, restoring state institutions and infrastructure and repairing the social fabric. As yet, no official, donor-led, comprehensive reconstruction process is underway.
The Development Champions emphasize that reconstruction and recovery efforts must begin immediately, even while the conflict is ongoing. Urgent humanitarian interventions should be linked to Yemen’s long-term economic recovery. The reconstruction of Yemen should aim to transform the country, and not only to restore the status quo ante. Yemenis and local institutions must be involved in this process from the planning stages to ensure legitimacy and local ownership; ultimately, local actors will be responsible for implementing these plans.
With these factors in mind, the Development Champions held in-depth discussions to develop recommendations and guidelines to ensure the reconstruction and recovery of Yemen is a comprehensive, effective process that has a long-term positive impact. This policy paper presents those recommendations. They include measures to link immediate humanitarian interventions to Yemen’s long-term economic recovery; mechanisms to address fiscal challenges and enhance social protection; guidelines to create new jobs, rebuild infrastructure and strengthen the rule of law; and strategies to enhance local governance and local inclusion in the reconstruction process.
The conflict in Yemen has created the worst humanitarian crisis in the world; this has been exacerbated by the devastation of the country’s economy.[1] As the conflict approaches its fifth year, fighting has damaged state institutions and destroyed physical infrastructure, including schools, hospitals, road networks, businesses and homes. The state’s provision of basic services such as health care, education, water and electricity, was weak prior to the conflict, and these services have deteriorated further during the war; in addition, the state has not paid regular salaries to its civil servants since 2016. The social fabric has also been severely damaged.
The conflict has driven the collapse of Yemen’s economy and created multiple challenges for the country’s banking and financial sectors. The country’s gross domestic product has contracted by 50 percent.[2] The Yemeni rial has lost more close to two thirds of its purchasing power, relative to the US dollar, since March 2015.[3] The administration of the Central Bank of Yemen has been divided across frontlines since September 2016. The Yemeni government has been reliant on a $2 billion deposit provided by Saudi Arabia in January 2018 for its foreign currency reserves, with little apparent vision on how to proceed when this runs out. Yemen’s primary capital-generating sectors are not functioning at capacity, and the state has not been able to resume effective revenue collection.
While there have been discussions about the reconstruction and recovery process in Yemen, no official donor-driven, coordinated, comprehensive response has begun. The World Bank has been developing a reconstruction and recovery blueprint, but seems to have ended this effort without tangible results. Saudi Arabia and the United Arab Emirates launched the Yemen Comprehensive Humanitarian Operations, which included minor road reconstruction. Riyadh has since announced the Saudi Program for Reconstruction, which appears to be ad-hoc with short-term interventions, limited to areas under the control of the internationally recognized Yemeni government.
The Development Champions emphasize that reconstruction and recovery efforts cannot wait until the conflict ends. They held in-depth discussions about the needs and demands of an effective reconstruction process in the Yemeni context and developed the following set of’ guidelines and recommendations to approach the reconstruction of Yemen.
Among Yemen’s most pressing humanitarian challenges are widespread food insecurity and an ongoing cholera outbreak. Conflict heightens the threat of famine, creating food shortages and reducing the ability of Yemenis to buy food. Fighting has also damaged sanitation infrastructure and interrupted health services, compounding the country’s cholera epidemic.[4] The Development Champions highlight that these crises are linked to broader economic challenges.
Yemen’s economy has contracted by an estimated 50 percent cumulatively since March 2015.[5] The economic crisis has led to widespread unemployment and an increase in operating costs across sectors.[6] It has sharply shrunk government revenue and services, and has led to the suspension of civil service salaries.[7]
The ongoing conflict has worsened the state of Yemen’s already weak education system and health facilities, while undermining social protections for vulnerable parts of the population.[8] Looking ahead to potential reconstruction and recovery efforts, the Development Champions emphasize the need for inclusive social programming. Recovery and reconstruction interventions should target all members of a community, including children, youth, and women.
Airstrikes, shelling and and armed clashes have destroyed Yemen’s infrastructure and devastated health, education and sanitation services.[9] Roads, energy grids, water facilities and homes will need to be rebuilt. The Development Champions emphasize that the reconstruction of Yemen’s infrastructure must not aim only to restore the status quo ante. Rather, the process of rebuilding must empower Yemenis to provide for themselves in the future.
The conflict has had a severe impact on Yemen’s workforce. Many of Yemen’s 1.2 million public sector employees have not received a regular income since 2016. In addition, an estimated 55 percent of private sector employees were laid off in the first two and a half years of the war alone, as businesses closed or reduced their operating hours.[10] The Development Champions emphasize that job creation is not only essential to stabilize the Yemeni economy, but also to address the humanitarian crisis in the country.
The Development Champions recommend engaging local institutions and authorities at all stages of the reconstruction and recovery process. Although the Development Champions acknowledge that many local institutions lack the necessary capacity to assume responsibility for implementation directly, they point out that some local governance structures – notably those in Aden, Hadramawt, Hudaydah and Taiz – had proven more effective than others prior to the conflict.
The Development Champions emphasize that reconstruction efforts must include mechanisms to rebuild trust in central authority and the rule of law.
Finally, the Development Champions suggest establishing a new bureau to oversee reconstruction efforts:
To conclude, the Development Champions strongly underscore the importance of beginning the process of recovery and reconstruction even while the conflict is ongoing. In their views, the deteriorating conditions in Yemen require an immediate response. Reconstruction, the Development Champions suggest, could begin in secured areas: small-scale interventions could test the efficacy of reconstruction financing and implementation models.
[1] “Restoring Central Bank Capacity and Stabilizing the Rial,” Rethinking Yemen’s Economy, February 8, 2018, accessed February 21, 2019, http://sanaacenter.org/files/Rethinking_Yemens_Economy-policy_brief_2_en.pdf.
[2] “Yemen’s Economic Outlook – October 2018,” World Bank, October 3, 2018, accessed February 8, 2019, http://pubdocs.worldbank.org/en/547461538076992798/mpo-am18-yemen-yem-9-14-kc-new.pdf.
[3] Farea al-Muslimi, “Revitalizing Yemen’s Banking Sector: Necessary Steps for Restarting Formal Financial Cycles and Basic Economic Stabilization”, Sana’a Center for Strategic Studies, February 15, 2019. Accessed February 21, 2019. http://sanaacenter.org/publications/analysis/7049
[4] “Yemen: 2018 Humanitarian Needs Overview,” United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA), December 4, 2017, accessed February 21, 2019, https://reliefweb.int/report/yemen/yemen-2018-humanitarian-needs-overview-enar.
[5] World Bank, Yemen’s Economic Outlook – October 2018, 1.
[6] “Yemen’s Economic Outlook – October 2017,” World Bank, October 11, 2017, accessed August 3, 2018, http://www.worldbank.org/en/country/yemen/publication/yemen-economic-outlook-october-2017.
[7] Noah Browning, “Unpaid State Salaries Deepen Economic Pain in Yemen’s War,” Reuters, January 26, 2017, accessed December 7, 2018, https://www.reuters.com/article/us-yemen-security-salaries/unpaid-state-salaries-deepen-economic-pain-in-yemens-war-idUSKBN15A1WW; Mohammed Yahya Gahlan, “No Light at End of Tunnel for Yemen’s Economy,” Al-Monitor, March 8, 2018, accessed December 7, 2018, http://www.al-monitor.com/pulse/originals/2018/03/yemen-war-houthis-economy-central-bank-salaries-government.html#ixzz5NPkfYhwg.
[8] UNOCHA, Humanitarian Needs Overview 2018, 16.
[9] UNOCHA, Humanitarian Needs Overview 2018, 5.
[10] UNOCHA, Humanitarian Needs Overview 2018, 2.
[11]“Yemen Labour Force Survey 2013-14,” International Labour Organization, 2015, accessed February 4, 2018, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_419016.pdf.
[12]“Generating New Employment Opportunities in Yemen,” Rethinking Yemen’s Economy, October 17, 2018, accessed February 21, 2019, https://www.devchampions.org/publications/policy-brief/Generating-new-employment-opportunities.
[13] Wadhah al-Awlaqi, Maged al Madhaji, “Local Governance in Yemen Amid Conflict and Instability,” Rethinking Yemen’s Economy, July 2018, accessed February 21, 2019, https://devchampions.org/files/Rethinking_Yemens_Economy_No2_En.pdf.
In December 2018, 23 of Yemen’s leading socioeconomic experts convened in Amman during the Fourth Development Champions Forum to discuss economic confidence-building measures in the peace process in Yemen. The discussions at the Forum, which is part of the Rethinking Yemen’s Economy initiative, touched on a number of economic mechanisms that could be implemented to build confidence. These included supporting the Central Bank as an independent institution that serves all of Yemen; ensuring the deposit of public revenues in all governorates at the Central Bank headquarters in Aden; and opening ports and ensuring the free movement of goods, humanitarian aid and people between governorates. The Forum focused on the payment of salaries and pensions to all civil servants due to the critical importance of the issue; this policy brief presents the outcomes of this discussion.
As a key step to simultaneously address the humanitarian crisis in Yemen and build confidence between the parties engaged in the peace process, the Development Champions recommend that the Yemeni government resumes salary payments to all civil servants working in the administrative apparatus of the state registered in the Ministry of Civil Service database of 2014 across Yemen, prioritizing payments to education and health workers. The Yemeni government should also continue to provide liquidity to guarantee the payment of pensions to all public sector retirees. Meanwhile, Ansar Allah should allow all state revenues in areas under their control to be deposited into the accounts specified by the Central Bank of Yemen temporarily headquartered in Aden, and all parties should work toward the restoration of the Central Bank as a national institution that serves all of Yemen. The Development Champions call on regional and international donors to cover any funding gap to support the payment of salaries and pensions.
The government is the biggest employer in Yemen. Yemen’s public sector experienced rapid growth in the 1990s, when patronage was rife and political parties sought to win support by distributing jobs in the civil and military services. By 2014, the public sector payroll included 30.6 percent of the Yemeni labor force, as shown in Figure 1. This payroll was inflated, however, as it included significant numbers of “double-dippers”, who held more than one position and received multiple salaries, as well as “ghost workers”, who did not exist but whose salaries were collected by their supervisors. As shown in Figure 2, in 2017 up to 40 percent of the population was dependent on government salaries in the governorates of Marib, al-Jawf, Abyan and the Capital Secretariat (Sana’a). As a result, public sector salaries and pensions have accounted for a large share of the money supply in the macroeconomic cycle and the monetary and fiscal cycles. These payments also have a direct and indirect impact on multiple economic indicators, including the gross domestic product and the general state budget.
In September 2016, the payment of salaries for 1.2 million public sector employees was suspended amid a liquidity crisis. The same month, the Central Bank was relocated from Sana’a to Aden. Salary payments resumed in early 2017, but these were generally restricted to areas controlled by the internationally recognized Yemeni government. Since November 2018, payments of public sector pensions have been extended to reach all retirees in all areas of Yemen. Prior to this, pensions had been paid to around two-thirds of public sector retirees.
Due to the size of Yemen’s public sector, this has had catastrophic implications at a time when Yemen faces the worst humanitarian crisis in the world, with 10 million Yemenis on the brink of starvation, in part because they cannot afford food. Public Sector Workers often support large families or function as a safety net for entire villages, so the suspension of their salaries left millions of Yemenis without their main breadwinner and many more without anyone to turn to for a loan.
Meanwhile, the non-payment of teachers, doctors and nurses has deteriorated services in the health and education sectors.
Due to the interrelated dynamics at play in the Yemen conflict, economic issues are intertwined with security and political considerations, and addressing the economic crisis in Yemen is thus vital as a confidence-building measure to support the peace process. Progress toward economic stabilization would have positive implications in breaking the cycle of conflict. Crucially, resuming salary payments to public sector employees would improve immediate prospects for millions of Yemenis.
In 2014, around 1.25 million people were employed by the government in Yemen, according to data from the Ministry of Civil Service and Pensions. Of these, 38 percent were employed in the state’s administrative apparatus, 52 percent in the military and security sectors and 9 percent in economic sector units (state-owned enterprises), independent and attached units, and special funds.
The majority of the 472,000 public sector workers in the administrative apparatus – 87.6 percent – were employed by local authorities, mostly in the education and public healthcare sectors. Of the roughly 653,000 people employed in the military and security sectors, 70 percent worked for the Ministry of Defense, while 28 percent were employed by the Ministry of Interior and 2 percent by the Political Security Organization.
Data from the General Authority for Social Security show that there were 123,000 pensioners in 2014, 88 percent of whom were male. This figure does not include pensioners who retired from the Ministries of Interior or Defense, for whom insufficient information was available.
Prior to the conflict, public sector salaries constituted one of the largest items in the state budget, accounting for an average of 32 percent of government spending between 2001 and 2014. In 2014, the budget item for public sector salaries amounted to 1.14 trillion Yemeni rials (YR), which at the time was equivalent to US$5.3 billion. This included YR546.9 billion to the civil service, YR430.2 billion to the military and security services and YR162.4 billion to the economic sector units. Meanwhile, the General Authority for Social Security and Pension spent YR64.8 billion in 2014 to pay pensions to retirees on its register. This did not come from the state budget, but was instead financed through deductions from civil servants’ salaries.
The conflict has driven an economic collapse in Yemen. Interruptions to oil exports, which once made up half the state’s annual income, contributed to a sharp decline in government revenues. In addition, the remaining revenues, in particular customs and taxes, have been split between Ansar Allah and the internationally recognized Yemeni government.
The Yemeni government spent YR745 billion on wages and salaries in 2018, according to government data from early December 2018, a drop to 76.3 percent of the 2014 government spending on wages and salaries. However, government spending on salaries for the military and security services increased by around 15 percent since 2014, while only covering the military and security personnel in government-controlled areas. Spending on salary payments to the civil service, meanwhile, was only 46.2 percent of 2014 levels, partly because the government only paid 51 percent of civil servants regularly.
In late 2018, the government approved a 30 percent pay rise for civil servants who were receiving salaries. This inflated the costs in the state budget at a time of limited public revenues and divided monetary authorities. Unless direct budget support is received from external grants and aid to pay civil servant salaries, the government salary bill will increase the budget deficit and risk the use of inflationary financing, like printing new rial banknotes and obtaining more overdraft financing from the Central Bank, thus further destabilizing Yemen’s economy.
After in-depth discussions, the Development Champions developed the following recommendations to respond to the salary crisis that has exacerbated the humanitarian catastrophe in Yemen:
This policy brief outlines recommendations for the immediate priorities of the Government of Yemen, both to achieve quick wins and to prepare the ground for medium and long-term success. These recommendations are the outcomes of in-depth discussions held during the fourth Development Champions Forum convened on December 8-11, 2018, in Amman, Jordan. They are designed to offer Prime Minister Maeen Abdulmalik Saeed and his cabinet a set of practical measures to help the government build on the momentum and increased visibility it achieved in the final quarter of 2018.
The immediate priorities recommended by the Development Champions include steps to support the stabilization of the local currency. an area in which tangible progress has already been made. The Champions also urge the government to regularize the payment of public sector salaries and pensions. Another immediate priority for the government should be to take steps to stabilize and transform Aden, the Champions suggest, based on the shared consensus that the southern coastal city could become a model for the rest of Yemen. The Champions emphasized that developing Aden would depend on improving the level of security across the governorate.
While recognizing that the government faces immediate challenges that demand attention in Aden and across the country, the Development Champions urge the government to plan and implement procedures to prepare for the country’s medium and long-term future. These strategies should address the root causes of Yemen’s socio-economic instability, and not just its symptoms.
Among the most important actions to prepare for long-term priorities is the expansion of the roles and responsibilities of local government authorities, the Champions concluded. During the conflict, decision-making authority has filtered down to the local level and become far more decentralized. The government should build on this new reality to reconfigure the state and its relationship with local government authorities.
The following recommendations for the Government of Yemen are divided in two sections: quick wins (immediate priorities) and actions for medium and long-term priorities. Recommendations for immediate priorities are presented in three categories: the first addresses measures to support the stabilization of the Yemeni rial; the second identifies steps to regularize the payment of public sector salaries and pensions; and the third outlines ways to stabilize and transform Aden into a model for the rest of Yemen. Actions to prepare for Yemen’s mid- and long-term priorities are then presented. These include recommendations to expand the roles of local government authorities; restore confidence in the state; develop pilot development programs; increase state efficiency; and restructure government debt.
The Government of Yemen should take the following actions to build on the recent progress made toward stabilizing the Yemeni rial and market exchange rates. Currency fluctuations directly affect the prices of food and other basic commodities and thus impact the lives of all Yemeni citizens.
The Government of Yemen should prioritize the payment of public sector employee salaries and state pensions, not least because the infrequent payment of these salaries has reduced individual purchasing power and thus exacerbated the severe humanitarian crisis in Yemen. The infrequent payment of salaries has also contributed to the collapse of the education and healthcare sectors. With this in mind, the Development Champions present the following recommendations:
While acknowledging that the security situation in Aden is in flux, the Government of Yemen should start taking steps that would allow the stabilization and transformation of Aden into a fully-functioning city and governorate. The government should prioritize the development of economic facilities and local infrastructure as well as the provision of essential services and security. The government must deliver a message that it is capable of creating a secure environment from which to govern and develop local areas, addressing the issues that have limited Aden’s progress, despite the liberation of the city in July 2015.
Develop Aden’s Economic Resources and Infrastructure:
Security:
Empower Members of the Local Community:
2. Restore Confidence in the State
Corruption, or the abuse of power for private gain, has been deeply entrenched in the Yemeni political economy for decades. Over the course of the ongoing conflict, however, as the war has fragmented and regionalized the country, state capture in Yemen has become far more complex. In the war economy, patronage networks are now emerging among previously marginal or unknown figures. The financial involvement of Saudi Arabia and the United Arab Emirates has extended patronage across national borders. Alleged collusion between Houthi-affiliated importers and officials allied with the internationally recognized Yemeni government indicates patronage networks that potentially cross the frontlines of the war themselves. As greater numbers and a wider variety of actors profit from illicit activity in the war economy, vested economic interests in continued conflict become more entrenched.
If state capture is among the main drivers of Yemen’s war economy, then post-conflict recovery must include a strong anti-corruption agenda. Policymakers must begin planning to address corruption as a part of a potential post-conflict strategy. Given the multi-faceted pervasiveness of corruption in Yemen, any anti-corruption agenda must aim to understand the complex configuration of patronage networks in Yemen, to be introduced gradually, and to get the buy-in of as wide a group of Yemenis as possible. Without these basic building blocks, more specific policy changes such as encouraging transparency or reducing conflicts of interest may founder. Corruption has become deeply entrenched in Yemen; any post-conflict anti-corruption agenda must be great in scope and long-term in vision.
Corruption, or the abuse of entrusted power for private gain,[1] is endemic in Yemen. In 2017 global anti-corruption watchdog Transparency International ranked Yemen 175 out of 180 countries, with an index score of only 16 on a scale of 0-100 where zero is highly corrupt.[2] Yemen’s index score has trended downward in the past several years, indicating increased corruption.[3]
Corruption in Yemen is not a new development. For decades the country has witnessed what the World Bank terms “state capture,” wherein an elite minority distorts state institutions for illicit gain.[4] A narrow range of actors have manipulated Yemen’s state institutions, reaping the rewards of their elevated position and dictating the rules of the game. The country’s informal elite networks have become more influential than formal state institutions — another hallmark of state capture.[6] State capture and lower-level administrative corruption, characterized by everyday bribery and favoritism, have been underpinned by informal institutions and a tacit cultural acceptance in Yemeni society that the abuse of power in business and politics is simply “how things are done.”[7] Despite the presence of a legal framework that technically prohibits such practices, arbitrary fines and unpredictable bribes to authorities are considered commonplace.[8]
The ongoing conflict in Yemen has not altered the basic workings of this system of state capture. An elite minority of actors continues operate according to rules of the game that remain fundamentally unchanged from before the conflict. However, the players involved are shifting. Yemen’s burgeoning war economy has seen the emergence of previously marginalized or unknown actors. Patronage networks now cross frontlines, with perceived adversaries willingly cooperating for the sake of maximizing private gain. The networks also now extend beyond Yemen’s borders. To some extent, these shifting patronage networks — and the war economy that supports them — are a driving force behind the conflict. If Yemen is to recover from this period of violence and instability, corruption cannot go unaddressed.
The following policy brief details the development of Yemen’s war economy, new players and dynamics in Yemen’s corruption networks, and then offer recommendations to international stakeholders and the Yemeni government to curb the worst excesses of corruption over the long run post-conflict.
As the conflict in Yemen has evolved since March 2015, so too has its burgeoning war economy. In the war economy, corruption has become systemic and even, to some degree, apolitical. At first glance, actors who are politically and militarily opposed to one another compete for influence on the ground. Beneath the surface, however, the reality is more complex. A wide array of actors shape Yemen’s thriving war economy: senior decision-makers, military commanders, established and newly empowered businessmen, local security officials that control checkpoints, commercial bankers, money exchangers, truck drivers and civil servants. Networks of corruption transcend the conflict, seamlessly crossing frontlines and regional borders, with perceived adversaries cooperating for the sake of maximizing profits.
The conflict has seen state resources – specifically energy resources – come under the control of actors that were previously marginalized or unknown. In northern Yemen, the Houthis have taken control of the import, distribution, and sale of fuel as well as customs and taxation, the telecommunications sector, and car imports.[9] The internationally recognized government, led by Hadi, nominally controls all areas not controlled by the Houthis. However, for large periods of the conflict, Hadi and members of his cabinet have operated from exile in Riyadh, Saudi Arabia.
In the functional absence of the internationally recognized government, the UAE-backed pro-southern independence body Southern Transitional Council (STC) has been gaining influence in southern Yemen. A large swath of Yemen’s southern coastline that stretches from the southwestern Taiz governorate to northeastern al-Mahra governorate – and includes the ports located in Taiz, Aden, Hadramawt, Shabwa, and al-Mahra governorates – is now monitored by the UAE directly or through UAE-backed security actors such as the Hadrami and Shabwani Elite forces. The Hadrami and Shabwani Elite forces also have influence over the key energy facilities in both Hadramawt and Shabwa.[10] Meanwhile, the country’s other major energy facilities in Marib, nominally under the authority of the internationally recognized government, are increasingly under the independent control of the governorate’s own local authorities.
As in Saleh’s era, the inflation of military payrolls with non-existent soldiers (“ghost soldiers”) continues to be a major source of patronage for actors operating within Yemen’s military and security apparatus. Senior officers, particularly those operating under the banner of the internationally recognized Yemeni government, reportedly exaggerate the number of soldiers under their command in order to pocket the excess salary payments. Government officials are also thought to be complicit in this scheme.[11]
Besides salaries, senior military commanders receive matériel (weapons, ammunition, fuel, vehicles and other important equipment) based on the number of soldiers that they claim to have under their command. Inflating their payroll results not only in extra salary payments but also extra matériel, which can then be sold at a profit.
The money for inflated payrolls comes primarily from the two dominant members of the Saudi-led coalition, Saudi Arabia and the UAE. The entrance into the conflict of these two wealthy patrons has increased the incentive for various anti-Houthi tribal, military, and security commanders to fabricate the number of men under their command.[12] Lower down the chain of command, anti-Houthi military and security personnel “double dip” — they are registered for payment on more than one command roster, thus receive two separate salaries from two different sources. s the two wealthy countries continue to fund inflated and duplicated military payrolls, Yemeni patronage networks extend beyond national borders.
There is evidence to suggest that weapons reportedly being smuggled to the Houthis pass through areas nominally under the control of the internationally recognized Yemeni government.[14] While the details of the weapons flows are uncertain (regarding weapon type, quantity, and entry point into the country), the ease with which weapons make their way from the eastern governorates to Houthi-controlled areas indicates willing collusion among actors affiliated with both sides of the conflict. If both parties to the conflict are in fact profiting from the same weapons flows, it suggests that patronage networks have come to transcend the conflict’s frontlines.
After Yemen’s oil and gas facilities went offline, the country became dependent on fuel imports. This presented an opportunity for established players and for those looking to capitalize on the country’s fuel needs. Fuel imports have become the most lucrative branch of Yemen’s energy sector during the conflict.[15]
Ahmed al-Eisi is the dominant player in Aden. Al-Eisi is aided in his dominance by his ownership of the top maritime fuel transportation company in Yemen, Alessi Group. Opaque tender bidding processes essentially hand al-Eisi the procurement contract for supplying fuel to Aden: one contract viewed by the author contained conditions that included a tight fuel delivery deadline that no other applicant could meet.[16] With Alessi Group holding a monopoly over Aden Refinery Company (ARC), the sole entity authorized to import fuel into Aden, al-Eisi in effect has a monopoly over fuel imports — and, by default, distribution. Although Hadi in March 2018 nominally “liberalized” fuel imports in areas under the nominal control of the internationally recognized Yemeni government, there have been no visible changes in al-Eisi’s monopoly in Aden thus far.
In Houthi-controlled areas, fuel imports are an equally significant source of patronage. Houthi-affiliated fuel importers who were previously unknown to members of the Yemeni business community have over the course of the conflict learned from — and supplanted — established players such as CruGas.[17] These Houthi-affiliated fuel traders now effectively control fuel imports through Hudaydah Port and domestic fuel market sales in areas under Houthi control. They allegedly import low-quality Iranian petrol and diesel in order to sell it on the local Yemeni market for a significant markup.[18] They have reportedly targeted the assets, such as fuel transportation trucks and petrol stations, of non-Houthi traders.[19] They also reportedly require non-Houthi competitors to pay hefty unofficial last-minute fees to unload at Hudaydah Port.[20]
Notably, the blockade of Houthi-controlled ports introduced another source of patronage. The Saudi-led coalition would only permit imports if the request had President Hadi’s seal of approval. This empowered Hadi’s son, Jalal Abdo Rabbu Mansour Hadi. Despite holding no official government position, from March 2015 until the installation of the UN Verification and Inspection Mechanism for Yemen (UNVIM) in May 2016, Jalal reportedly became the man to contact and essentially pay off in order to obtain the necessary fuel import permits.[21] Houthi-affiliated businessmen reportedly established a good working relationship with Jalal as a result of obtaining fuel import permits for Hudaydah through him. They obtained those permits through middlemen that brokered deals in Sana’a that were then signed off on in Riyadh.
Besides enabling the specific mechanisms of inflating military payrolls and monopolizing fuel imports, the conflict has allowed governing authorities to avoid scrutiny on their use of funds. In some instances, this is merely a lack of transparency: in Marib, for example, the Central Bank of Yemen (CBY) branch is unwilling to disclose the numbers behind its locally sourced revenues and expenditures.[22] Also hidden from scrutiny are the customs revenue generated from Yemen’s ports, the Houthi-controlled inland customs checkpoints, and the Shahen and al-Wade’ah land borders with Oman and Saudi Arabia.[23]
However, governing authorities on both sides have also reportedly actively misused state funds. I n 2017, 2 billion Yemeni rials (YR), printed in Russia and en route to the CBY in Aden, were reportedly delivered straight to the presidential palace in Aden; by now the money has allegedly been disbursed via the office of the prime minister as “discretionary spending.”[24] For a time, the internationally recognized government was receiving payments for its stake in the Masila oilfield in Hadramawt directly into a private bank account held at AlAhli bank in Saudi Arabia in President Hadi’s name.[25]
The Houthis, meanwhile, have been accused of diverting money from the CBY in Sana’a to pay for their military campaign.[26] The money is allegedly used to pay the salaries of Houthi military and security commanders and their respective fighters. It was also used to pay for thousands of Houthi-sanctioned civil servants installed by the group in the Ministry of Interior in Sana’a as part of a broader strategy in which they sought to replace Saleh loyalists with Houthi supporters over the course of 2016 and 2017.[27] The Houthis reportedly installed many young, inexperienced, unqualified individuals in senior positions at the ministry as part of an attempt to weaken Saleh and his allies’ hold over north Yemen’s military and security apparatus, with the Republican Guard one of the main targets.[28] This Houthi effort to staff important institutions with supporters served the aim of garnering power and as well as a system of patronage to provide employment and comparatively stable government salaries to Houthi supporters.
Yemen’s war economy presents a challenge to any policymaker concerned with building peace in Yemen. It is clear that no one individual or group is solely culpable for corruption. Instead, what external analysts might see as corrupt practices are widely accepted as normal transactions – simply the cost of doing business. More importantly, the conflict’s shifting, expanding networks of patronage may form the basis of the kind of informal institutions that could enable corrupt practices in a post-war context. This could potentially endanger the prospect of peace. Corruption, therefore, must be an integral part of any post-conflict agenda.
As the war in Yemen continues, the main sources of patronage and power — control over state institutions and access to major sources of revenue — remain unchanged from Saleh’s era. Weapons flows, tendering processes, fuel subsidies and falsified military payrolls continue to enrich the few at the expense of the many.
However, Yemen is witnessing a shift in the individuals involved. Patronage networks have become more complicated. Previously marginal or unknown figures are making inroads into traditional means of illicit profit. Parallel state institutions have emerged, affording new instances of state capture. The entrance of two wealthy regional patrons — Saudi Arabia and the United Arab Emirates — has changed the calculus of wealth. Reported collusion between Houthi-affiliated importers and senior officials allied with the internationally recognized Yemeni government, if true, represents adversaries at war cooperating for purposes of private gain.
Despite the grim reality of ongoing corruption in a conflict that shows little sign of abating, policymakers must nevertheless begin now to consider how to build a lasting peace. If corruption is among the main drivers of the conflict, then post-conflict recovery must include an anti-corruption agenda.
Given the complex nature and wide reach of corruption in Yemen, any anti-corruption agenda must seek to understand the complex configuration of patronage networks in Yemen, to be introduced gradually, and to get the buy-in of as wide a group of Yemenis as possible. Without these basic building blocks, more specific policy changes such as encouraging transparency or reducing conflicts of interest may founder. Corruption has become deeply entrenched in Yemen; any post-conflict anti-corruption agenda must be great in scope and long-term in vision.
Any attempt to address the abuse of power in Yemen should include a detailed analysis of the complex, context-specific mechanisms of corruption at the heart of Yemen’s war economy. Rather than shying away from the time-consuming and difficult task of disentangling the broad, ever-evolving political and economic relationships among the actors engaged in corrupt activity, policymakers must attempt to understand such complexity. A well-developed contextual understanding will allow policymakers to weigh up potential benefits and anticipate pitfalls when developing a anti-corruption strategy. Constant observation and analysis is key to keeping pace with developments on the ground.[29]
State capture should be rolled backed gradually, with a phased implementation of anti-corruption reforms. It would be unrealistic and perhaps counterproductive for policymakers to introduce a sudden and aggressive anti-corruption strategy. Actors currently profiting from the war economy may resist wholesale changes. Worse, rushed or superficial efforts to combat corruption may lead to grave policy errors where instead of restraining the actions of corrupt individuals the policies lead to greater suffering among the Yemeni people, who are already dealing with the world’s worst humanitarian crisis.[30]
Given the widespread reach of corruption in Yemen, anti-corruption efforts should not selectively target any single actor, but should instead seek to have an impact across the system as a whole. While efforts should certainly be made to curb the activities of actors known to be engaging in corruption, such actors should not be singled out exclusively. To do so would leave policymakers open to accusations of political bias. If any breakthrough is to be made in creating short- or long-term peace, policymakers will need the buy-in of as many actors as possible.
Bibliography
[1] “What is Corruption?” Transparency International, accessed June 25, 2018, https://www.transparency.org/what-is-corruption.
[2] “Corruption Perceptions Index 2017,” Transparency International, last modified February 21, 2018, accessed June 25, 2018, https://www.transparency.org/news/feature/corruption_perceptions_index_2017.
[3] “Corruption Perceptions Index 2017 Shows High Corruption Burden in More than Two-thirds of Countries,” Transparency International, last modified February 21, 2018, accessed June 25, 2018, https://www.transparency.org/news/pressrelease/corruption_perceptions_index_2017_shows_high_corruption_burden_in_more_than.
[4] World Bank, Anticorruption in Transition: A Contribution to the Policy Debate, (Washington, DC: World Bank, 2000) accessed June 25, 2018, 1, https://siteresources.worldbank.org/INTWBIGOVANTCOR/Resources/contribution.pdf.
[5] For details regarding corruption in Yemen during the rule of late former President Ali Abdullah Saleh, please see the full white paper of “Combating Corruption in Yemen” at
[6] Glenn E. Robinson et al., Yemen Corruption Assessment (Burlington, VT: ARD, 2006) accessed June 25, 2018, https://photos.state.gov/libraries/yemen/231771/PDFs/yemen-corruption-assessment.pdf.
[7] Abdulwahab al-Kibsi has called this the “inevitability mindset” — Yemeni citizens have come to expect corruption to be so pervasive that they themselves are powerless against it. Abdulwahab Alkebsi and Christopher Boucek, “Corruption in Yemen: Screening of Destructive Beast,” Carnegie Endowment for International Peace, last modified September 30, 2010, accessed June 25, 2018, http://carnegieendowment.org/2010/09/30/corruption-in-yemen-screening-of-destructive-beast-event-3034.
[8] Researcher interview, October 2017.
[9] In addition to the customs duties the Houthis charge at Hudaydah Port, they also established a number of internal customs checkpoints over the course of the conflict. The major customs checkpoints are located in al-Bayda governorate, Arhab district in northern Sana’a governorate, and Dhamar governorate. The Houthis also installed other customs checkpoints for travel between the following destinations: Marib–Sana’a, Taiz–Ibb, Abyan–al-Bayda, and al-Dhalea–Dhammar. While conducting research for this paper, several sources spoke to the author about the “probability” that there are individuals (both Houthi and non-Houthi-affiliated) that are exploiting the customs and taxation system the Houthis established for their own personal gain. Though investigations are ongoing, at the time of writing, the research had not yielded enough verified information to present in this paper.
[10] During the conflict, the UAE helped establish local security forces across southern and eastern Yemen, providing them with training, arms, equipment, and money. There are the Security Belt forces in Aden, Abyan, and Lahij, as well as the Hadrami Elite and Shabwani Elite forces.
[11] Peter Salisbury, “Yemen: National Chaos, Local Order,” Chatham House, last modified December 20, 2017, accessed May 23, 2018, 20. https://www.chathamhouse.org/publication/yemen-national-chaos-local-order.
[12] Tribal leaders providing security forces are also paid through a similar mechanism. Sources with a first-hand knowledge of the composition of anti-Houthi forces stationed in Marib, claim that Saudi Arabia is paying for approximately 50,000 anti-Houthi fighters.This number is almost certainly inflated and is thought to include money paid to secure the backing of local tribes. Researcher interviews, Cairo, February and March 2018.
[13] Private conversations with Adeni activist, April and June 2018.
To note but one example, this is known to occur in some of Yemen’s southern governorates such as Aden where UAE-backed security actors are present. According to a source well-connected with Security Belt (Hizam Amni) forces, there are members of Security Belt who receive a salary from their chief patron, the UAE, while also being registered on a separate list with the Yemeni ministry of interior.
[14] Notably, there were no weapons seizures off Yemen’s western coastline in 2017 or in the first half of 2018. Weapons are being transferred from Yemen’s eastern governorates, particularly al-Mahra and Shabwa, to Houthi-controlled areas via al-Bayda or Marib governorates: testament to the fact that “business as usual” continues with regard to weapons smuggling. As long as each party along the way is paid their share – from arms dealers to those driving the trucks and individuals stationed along the road manning the checkpoints – then arms sales run smoothly, no matter where those arms are destined. This conclusion is based of numerous conversations and interviews with tribesmen from shabwa, well-informed contacts with knowledge of known smugglers in al-Mahra, senior military commanders, among others from January until May 2018.
[15] Two key developments in 2015 gave fuel imports added importance: (1) a sudden decline in oil and gas production and the cessation of oil and gas exports due fighting on the ground that also led to the departure of foreign energy companies; and (2) the Houthis’ decision to eradicate fuel subsidies on July 27, 2015 (a year after they staged on the outskirts of Sana’a a public opposition campaign against Hadi for doing the same thing) and easing of fuel import restrictions. See Yemen Ministry of Planning and International Cooperation, “Oil Sector Recovery in Yemen Urgently Needed,” ReliefWeb, last modified May 2016, accessed June 15, 2018, https://reliefweb.int/sites/reliefweb.int/files/resources/yseu14_english_final_1.pdf; Abubakr al-Shamahi, “Yemen Returns Full Circle as Houthis End Fuel Subsidies,” New Arab, last modified July 28, 2015, accessed June 15, 2018. https://www.alaraby.co.uk/english/news/2015/7/28/yemen-returns-full-circle-as-houthis-end-fuel-subsidies; “Houthis Cut Oil Subsidies Endangering Support,” Medialine, last modified August 3, 2015, accessed June 15, 2018. http://www.themedialine.org/news/houthis-cut-oil-subsidies-endangering-support.
[16] Private conversations with a Yemeni fuel trader, January-March 2018.
[17] Ammar Tawfiq Abdulrahim Mutahar runs CruGas. He is also the listed Deputy General Manager of Tawfiq Abdulrahim Mutahar Group (“TAM”) but is reportedly not on good terms with his brothers who have taken over TAM following the death of their father Tawfiq in 2013. Mohamed al-Absi, “What is the Truth about the Oil Company and the Black Market?” mohamedalabsi.blogspot.com (blog), June 7, 2016, accessed June 25, 2018, https://mohamedalabsi.blogspot.com/2016/06/blog-post_28.html.
[18] When sold on the black market, the profit margin is particularly large. Mohamed al-Absi, “Since the Disaster of Flotation Fuel in the Stations with Official Pricing: More Black Market Scandals,” Mohamed al-Absi (blog), December 5 2016, accessed June 25, 2018, https://mohamedalabsi.blogspot.com/2015/11/blog-post_14.html; Mohamed al-Absi “Document: Mechanism for the Purchase of Oil Company 50% of Shipments Merchants Sold to the Citizen at the Official Price,” Mohamed al-Absi (blog), June 28, 2016, accessed June 25, 2018, https://mohamedalabsi.blogspot.com/2016/06/50.html.
[19] Mohamed al-Absi, “Since the Disaster of Flotation Fuel in the Stations with Official Pricing: More Black Market Scandals,” Mohamed al-Absi (blog), December 5 2016, accessed June 25, 2018, https://mohamedalabsi.blogspot.com/2015/11/blog-post_14.html; Mohamed al-Absi “Document: Mechanism for the Purchase of Oil Company 50% of Shipments Merchants Sold to the Citizen at the Official Price,” Mohamed al-Absi (blog), June 28, 2016, accessed June 25, 2018, https://mohamedalabsi.blogspot.com/2016/06/50.html.
[20] Refusal would consequently leave the importer and their fuel shipment stranded as well as faced with the daunting prospect of having to pay expensive demurrage costs. Other additional costs incurred once the fuel shipment is unloaded and ready to be sent out for distribution and sold on the local market include the payment of fees to Houthi officials in each Houthi-controlled governorate and Houthi forces manning the checkpoints that transportation trucks must pass through during the journey from Hudaydah port to the point of destination. Researcher conversation with a well-informed Yemen economic expert with a first-hand knowledge of the distribution of fuel and other commodities after being imported via Hudaydah port, June 2018.
[21] Private conversation with two different Yemeni economic experts with a detailed knowledge and understanding of Yemen’s oil and gas industries in December 2017 and January 2017; “UNVIM”; “United Nations Verification and Inspection Mechanism for Yemen: Update May 2016,” United Nations Verification and Inspection Mechanism, last modified May 2016, accessed June 15, 2018, https://www.vimye.org/docs/UNVIM%20Update%20May%202016.pdf.
[22] Researcher interview with confidential source with close ties to CBY in Aden, June 2018. Marib, one of Yemen’s oil-producing regions, reached a deal in 2017 with the internationally recognized government allowing the governorate to keep a share of the revenues from oil produced in Marib. As of this writing, however, ongoing disputes between the CBY branch in Marib and the branch in Aden have meant that instead of transferring 80 percent of oil revenues to the Aden branch, the Marib branch has refused to transfer any.
[23] Peter Salisbury, Yemen’s Cratered Economy: Glimmers of Hope? (Washington, DC: Arab Gulf States Institute in Washington, 2018) accessed June 25, 2018, https://www.agsiw.org/wp-content/uploads/2018/02/Salisbury_Yemen-Cratered-Economy_ONLINE-1.pdf.
[24] In 2016, then-CBY Governor Monasser al-Quaiti, ordered a total of YR400bn new banknotes, worth approximately $1.2bn at the time. In 2017, there were several separate shipments of Russian-printed Yemeni rials, presumably tied to the order placed by al-Quaiti. Rather than being deposited straight into the CBY in Aden, YR2bn was reportedly delivered straight to the presidential palace in the Masshiq area of Crater district, Aden. According to a source with close ties to the CBY in Aden, the majority of this Russian-printed money has now reportedly been disbursed via the office of Prime Minister Ahmed Obaid bin Dagher as “discretionary spending.” The UAE supposedly grew increasingly frustrated with Hadi and the internationally recognized Yemeni government in 2015 over the lack of accountability over donor funds and government spending, to the point in which the UAE decided to limit the direct financial support it provided to Hadi.
[25] Researcher interview with confidential source with close ties to CBY in Aden, June 2018. See also: Salisbury, Yemen’s Cratered Economy.
[26] This particular accusation is what prompted Hadi to announce the relocation of the CBY headquarters from Sana’a to Aden and the dismissal of former CBY Governor Mohammed bin Hammam, see: Hadeel al-Sayegh, “Yemen President Names New Central Bank Governor, Moves HQ to Aden,” Reuters, last modified September 18, 2016, accessed May 23, 2018, https://www.reuters.com/article/us-yemen-cenbank/yemen-president-names-new-central-bank-governor-moves-hq-to-aden-idUSKCN11O0WB.
[27] Researcher interviews, Cairo, February and March 2018; Researcher WhatsApp conversation with an employee of the Houthi-controlled Ministry of Interior in Sana’a, in October, November, and December 2017.
[28] Researcher interviews, Cairo, February and March 2018; Researcher WhatsApp conversation with an employee of the Houthi-controlled Ministry of Interior in Sana’a, in October, November, and December 2017.
[29] This policy brief is meant to give policymakers an overview of the corruption mechanisms that have continued while the conflict rages. By the time it is published, some of those mechanisms are likely to have evolved further still.
[30] One example might be a policy to clamp down heavily on Yemen money exchangers/hawala networks due to concerns over the Houthis use of money exchangers to access foreign currency and pay exporters. Money transfer transactions are a critical lifeline for beleaguered citizens outside the commercial or political class. Regular citizens rely on remittance flows — the backbone of the money exchange system — to purchase essential commodities, including food and water. Any ill-considered disruption of these money flows may sever one of the few remaining lifelines for a broad subset of Yemenis whose interests are often ignored when discussing corruption-deterring measures.
Decades of political instability and cyclical armed conflict have curtailed Yemen’s economic growth, job creation and labor productivity. Before the current conflict, much of the country’s working population was engaged in unskilled labor, working in rural agriculture or informally employed in small businesses. More recently, the ongoing conflict has destroyed normal commerce and left millions of Yemenis without a means of supporting themselves or their families. Even those not directly affected by the fighting now face brutal economic hardship. The economic crisis has become the primary driver of what the United Nations has called the world’s largest humanitarian catastrophe. In the midst of this crisis, the need for job creation is paramount.
As part of the “Rethinking Yemen’s Economy” initiative, 22 of Yemen’s leading socioeconomic experts convened in Amman, Jordan on July 14–16, 2018 for the third Development Champions Forum. Sharing a collective sense of urgency to address Yemen’s worsening economic and humanitarian crises, the Champions discussed job creation in Yemen and developed potential strategies to combat increasing levels of unemployment and economic hardship. This policy brief presents the outcome of their discussions.
The Development Champions recommend that policy makers seek to create jobs immediately by investing in sectors that have historically been neglected in favor of oil and gas activities. This includes investing in agriculture, developing the fishing industry, expanding mining operations, and linking reconstruction efforts to the local construction sector. In the medium term, policy makers should look to new initiatives, such as constructing a free zone on the Yemen-Saudi border. By providing these livelihood opportunities in the immediate and medium term, policy makers will also help limit the number of Yemenis who feel forced to join an armed party to conflict because of economic necessity.
Prior to the current conflict, the workforce in Yemen, then totalling 4.86 million,[1] was largely uneducated, informally employed, and male-dominated.[2] Only 23 percent of the workforce had received secondary education, while only eight percent had received tertiary education.[3] Roughly 30 percent of jobs were in the agricultural sector, followed by trade (wholesale or retail) at 23 percent. This was reflected in the two most common occupations among Yemenis: crop grower and shop salesperson.[4] The majority of employment in Yemen was in the informal sector (73.2 percent). Of Yemen’s 4.2 million employed, 3.27 million were engaged in “own-use production,” including 2.4 million subsistence foodstuff producers.[5] Roughly 30 percent of the employed population were “own-account” or self-employed workers.
Working abroad has long been an important source of employment for Yemenis.[6] As of 2015, an estimated one million Yemenis worked abroad.[7] Of these, the majority were males engaged in the service sector, largely in low-paying occupations.[8] Roughly 70 percent of Yemenis working abroad had attained only primary education, and roughly 80 percent were from rural households.[9] About half had been unemployed before leaving Yemen.[10] According to a source at the Central Bank of Yemen (CBY), remittances made by Yemeni expatriates totalled an estimated US$3.8 billion annually from 2012-2015.[11] This represented roughly 10 percent of Yemen’s gross domestic product (GDP) for these years.[12] An estimated 6.5 percent of Yemeni households in 2014 were dependent on income from remittances for daily basic needs.[13] An estimated 90 percent of total remittances to Yemen originated in GCC countries, particularly Saudi Arabia.[14]
Employment in Yemen was heavily imbalanced in terms of gender before the conflict. As of 2014, women accounted for only seven percent of employed Yemenis.[15] While 66 percent of working-age men participated in the labor force, only six percent of women were employed or looking for work.[16] This statistic had decreased sharply over two decades: as recently as 1996 women made up 29 percent of the workforce.[17] Among Yemeni women in the workforce prior to the conflict, the unemployment rate was 26 percent (compared to 12 percent among men).[18] On average, employed women worked fewer weekly hours than men (34 compared to 44 among men) and earned less: the average monthly rate for women from 2013-2014 was 40,400 Yemeni rials (YR) compared to YR 53,300 among men).[19]
Yemen has a young and rapidly growing population. An estimated 40 percent of Yemenis are under the age of 15.[20] At 2.4 percent, the annual population growth rate is one of the highest in the world.[21] Unemployment among youth is high: as of 2010, 45 percent of Yemeni youths were unemployed.[22] With each year, the need for jobs for Yemen’s youth will only increase.
Ongoing fighting has made it harder for Yemenis to support themselves and their families. The country’s economic output has decreased sharply during the conflict: its GDP contracted by an estimated 37.5 percent cumulatively since March 2015 and October 2017.[23] The conflict has interrupted the country’s oil exports, drastically reducing public revenues and Yemen’s reserves of foreign currency. The YR has depreciated significantly and per-capita purchasing power has declined.[24] The Saudi-led coalition’s sea blockade of Houthi-held ports has greatly restricted commercial and humanitarian deliveries while increasing the cost of imports that do get through. Physical damage to public and private infrastructure has affected the ability of businesses to operate.[25]
The costs imposed by conflict have had a drastic impact on Yemenis in the workforce. Most of the country’s 1.2 million public sector employees have gone without an income since 2016, when the CBY suspended most public sector salaries.[26] Businesses have laid off an estimated 55 percent of the private sector workforce.[27] Businesses have also, on average, cut their hours of operation in half.[28] More than a quarter of businesses in the industry, trade and services sectors have ceased operations altogether.[29]
The agriculture sector, which provides roughly a third of Yemen’s jobs, has seen farmers forced to abandon their land.[30] This has been due to several factors, among them the proximity to the fighting – as ongoing security discourages the private sector to invest with farmers – as well as rising fuel prices, costlier irrigation, and ongoing shortages of commodities essential to food production.[31] Prior to the conflict the agriculture sector was reliant on the government for financing; in the midst of the ongoing conflict and economic crisis, the government has made available no assistance to mitigate these costs and shortages. While some farmers have turned to solar power to supplement their energy needs, most cannot afford to do so. In 2017, the United Nations Food and Agriculture Organization (FAO) provided agricultural assistance to almost 600,000 farmers in Yemen.[32] At the same time, the blockade by the Saudi-led coalition has restricted Yemen’s exports of agricultural products, impacting the incomes of farmers and fishers.
For Yemenis employed in the fishing industry, the conflict has significantly decreased fishing activities. On the Red Sea coast in particular, increased fuel prices, a lack of cold storage, and limited access to fishing areas due to insecurity has resulted in the closure of many fishing sites.[33] The governorates of Taiz and Hudaydah have seen an estimated decrease of 75 percent in traditional fishing, while fishing in other governorates has halved since 2014.[34]
As incomes disappear, the Yemeni people have increasingly come to rely on remittances and humanitarian aid. As the Development Champions noted in the Forum, Yemeni breadwinners, faced with the daunting prospect of having to support themselves and their families in the absence of viable economic alternatives, are incentivized to seek an income through joining one of the many belligerent parties to the conflict. These Yemenis at risk include the hundreds of thousands of expatriates returning from Saudi Arabia following changing labor regulations in that country.[35]
Designing job creation mechanisms is thus not merely a question of Yemenis gaining employment in order to access basic needs and stem the steadily worsening humanitarian crisis. Job creation becomes a preventive measure against the self-perpetuating cycle of armed conflict, and in particular would help prevent youth from joining armed extremist groups.
While creating new jobs is necessary, it will be difficult for them to lead to a net gain in employment if currently existing jobs are not protected and maintained. A basic blueprint for achieving this is: (1) establish a baseline for the existing workforce at the appropriate level of detail (geographic area, sector, gender, profession, age group, education level, pay level, etc.); (2) identify those jobs that are potentially at risk and why; (3) establish an intervention plan to protect, sustain and enhance these jobs.
When designing practical job creation mechanisms, the Development Champions stressed throughout the forum that policy makers must acknowledge the current realities on the ground in Yemen. They argue that some of the challenges created by the conflict can be used to generate jobs. For example, in the course of the conflict, Yemeni cities have witnessed high levels of “reverse migration:” many Yemenis have abandoned their homes in urban centers and sought refuge in the rural areas from which their families originated. At the same time, the conflict is making it difficult and costly for Yemeni traders to import food from abroad.[36] These dynamics – an increase in the available rural workforce and increased demand for domestic food production – can be viewed as an opportunity for investment in Yemen’s agricultural sector.
Successful job creation in one geographic area or economic sector should also be viewed an opportunity to experience share and replicate success in other areas. For example, successful approaches to creating jobs in the agriculture sector in one governorate could potentially be replicated in other governorate – the idea being to identify success and leverage it.
Yemenis are mercantile by nature, and thus job creation schemes should focus on identifying pre-existing local potential and empowering it to grow and thrive, rather than trying to transplant foreign economic models into the Yemeni sphere. Empowering local potential would include investing in training programs to upgrade local business practices, knowledge sharing to spur local innovation, and technological infrastructure to increase efficiency and output. Such would be a powerful catalyst for a dynamic business climate that creates jobs and spurs rapid social progress.
The Government of Yemen has a crucial role to play in helping to facilitate private sector job creation. Primary among these is a lack of revenue. One means to help tackle this issue is to begin to reduce the high level of ‘ghost employees’ – workers that do not exist or do not show up for work – on the public payroll. While this recuperation of public funds would require minimal resources, it would require sustained political will.
Prior to the conflict, the central government also depended heavily on the hydrocarbons sector for generating revenue. This contributed to the marginalization of other sectors. With Yemen’s oil and gas facilities coming back online, the value of hydrocarbon production, domestic market sales, and exports are estimated to reach USD $1 billion in 2018. As government revenues increase, it is imperative that public spending prioritize economic diversification and job creation, particularly in previously marginalized sectors. Specifically, the agriculture, fishing, mining, and construction sectors should be expanded and modernized in order to catalyze job creation.
Agricultural
Before the conflict, considerable donor support existed for developing the agricultural sector in Yemen.[37] Domestic policy makers and international donors can build on this existing framework to create jobs via a range of agricultural development projects and programs:
Fishing
Fish along Yemen’s coast are plentiful. One Development Champion familiar with Yemen’s fishing industry estimated the Yemeni fishers land between 180,000-220,000 tons of fish per year. Much of the fishing is artisanal, using traditional methods, and thus even moderate equipment and training upgrades have the potential to substantially increase the sector’s economic potential. While further study is required regarding the specifics of any fisheries support initiative, viable avenues to consider are:
Mining
Yemen is rich in minerals.[38] According to one Development Champion, high-quality marble and limestone deposits exist in the mountain range that spans over 100 km from Aden to Lahj and Abyan governorates. An expanded mining industry could support jobs along an entire supply and production chain.
Construction
The conflict has inflicted an estimated US$19 billion in damage to Yemen’s infrastructure.[40] As Yemen faces a great deal of reconstruction work, reconstruction and relief efforts offer an opportunity for immediate job creation. A functioning construction industry will also support the expansion of other sectors.
[1] International Labour Organization (ILO), Yemen Labour Force Survey 2013-14 (Beirut: International Labour Organization, 2015), 7, accessed August 3, 2018, https://www.ilo.org/wcmsp5/groups/public/—arabstates/—ro-beirut/documents/publication/wcms_419016.pdf.
[2] World Bank, The Republic of Yemen: Unlocking the Potential for Economic Growth, Report No. 102151-YE (Washington, DC: World Bank, 2016), xi, accessed August 3, 2018, https://openknowledge.worldbank.org/bitstream/handle/10986/23660/Yemen00Republi00for0economic0growth.pdf.
[3] ILO, Yemen Labour, 7.
[4] ILO, Yemen Labour, 7.
[5] ILO, Yemen Labour, 6.
[6] Yemen Ministry of Planning and International Cooperation, “Yemeni Expatriates’ Remittances … Last Resource Under Threat,” February, 2018, 1, accessed August 3, 2018,
https://reliefweb.int/sites/reliefweb.int/files/resources/YSEU32_English_Final.pdf.
[7] Estimates of Yemeni expatriates vary. The World Bank estimates the number at between 1.0 and 1.2 million as of 2014; see World Bank, Yemen: Unlocking Potential, 68. The Gulf Research Center estimates 950,000; see “Estimates of the Figures of Foreign Nationals (Selected Nationalities),” Gulf Research Center, accessed September 11, 2018, http://gulfmigration.eu/gcc-estimates-figures-foreign-nationals-selected-nationalities-country-residence-gcc-2012-2016. The ILO’s Labour Force Survey puts the number much lower, at 103,000 Yemenis living abroad; see ILO, Yemen Labour, 6.
[8] ILO, Yemen Labour, 51; Yemen Ministry of Planning, “Remittances,” 2.
[9] ILO, Yemen Labour, 51.
[10] ILO, Yemen Labour, 51.
[11] Yemen Ministry of Planning, “Remittances,” 1.
[12] Yemen Ministry of Planning, “Remittances,” 3.
[13] Yemen Ministry of Planning, “Remittances,” 5.
[14] Yemen Ministry of Planning, “Remittances,” 2.
[15] ILO, Yemen Labour, 5.
[16] ILO, Yemen Labour, 5.
[17] World Bank, Female Labor Force Participation – Population Reference Bureau, 1998 Women of Our World, as cited in: World Bank, Yemen: Comprehensive Development Review.
[18] ILO, Yemen Labour, 5.
[19] ILO, Yemen Labour, 6.
[20] “Population Ages 0-14 (% of Total),” World Bank Open Data, accessed September 10, 2018, https://data.worldbank.org/indicator/SP.POP.0014.TO.ZS.
[21] “Population Growth (Annual %),” World Bank Open Data, accessed September 10, 2018, https://data.worldbank.org/indicator/sp.pop.grow.
[22] World Bank, Yemen: Unlocking Potential, 6.
[23] “Yemen’s Economic Outlook – October 2017,” World Bank, October 11, 2017, accessed August 3, 2018, http://www.worldbank.org/en/country/yemen/publication/yemen-economic-outlook-october-2017.
[24] Ali Azaki, “International Aid Organizations and the Yemeni Private Sector: The Need to Improve Coordination in Humanitarian Crisis Response,” Sana’a Center for Strategic Studies, March 16, 2018, accessed August 3, 2018, http://sanaacenter.org/publications/main-publications/5528#_ftn6.
[25] According to the United Nations Office for Humanitarian Affairs (OCHA), “From 1 October 2016 to 30 September 2017, a total of 8,878 conflict-related incidents, including airstrikes, armed clashes, and shelling, were reported throughout Yemen. Approximately 82 per cent of these incidents took place in five governorates: Taiz, Sa’ada, Al Jawf, Hajjah, and Sana’a.” See United Nations Office for the Coordination of Humanitarian Affairs, Yemen Humanitarian Needs Overview 2018 (New York: United Nations Office for Humanitarian Affairs, 2017), 5, accessed August 3, 2018, https://www.unocha.org/sites/unocha/files/dms/yemen_humanitarian_needs_overview_hno_2018_20171204.pdf.
[26] Noah Browning, “Unpaid State Salaries Deepen Economic Pain in Yemen’s War,” Reuters, January 26, 2017, accessed August 3, 2018, https://www.reuters.com/article/us-yemen-security-salaries/unpaid-state-salaries-deepen-economic-pain-in-yemens-war-idUSKBN15A1WW; Mohammed Yahya Gahlan, “No Light at End of Tunnel for Yemen’s Economy,” Al-Monitor, March 8, 2018, accessed August 3, 2018, http://www.al-monitor.com/pulse/originals/2018/03/yemen-war-houthis-economy-central-bank-salaries-government.html#ixzz5NPkfYhwg.
[27] OCHA, Yemen Humanitarian Needs, 7.
[28] World Bank, Toward a Blueprint for the Recovery and Reconstruction of Yemen – October 2017, as cited in OCHA, Yemen Humanitarian Needs.
[29] World Bank, Blueprint, as cited in OCHA, Yemen Humanitarian Needs.
[30] OCHA, Yemen Humanitarian Needs, 7.
[31] “Yemen Situation Report November 2017,” Food and Agriculture Organization, November 2017, accessed September 10, 2018, http://www.fao.org/fileadmin/user_upload/emergencies/docs/FAOYemen_sitrep_Nov2017.pdf. OCHA notes that this “is similar to the situation in 2015 during which an estimated 40 per cent of the farmers abandoned their agricultural land.” See OCHA, Yemen Humanitarian Needs, 7.
[32] “Yemen Situation Report November 2017.”
[33] Yemen Food Security Information System (FSIS) Development Programme, “Yemen Food Security Update,” ReliefWeb, October 2016, accessed September 10, 2018, https://reliefweb.int/sites/reliefweb.int/files/resources/yemen_fsis_programme_food_security_update_-_october_2016_-_15-10-16.pdf.
[34] “Severe Food Insecurity Widespread in Yemen,” Food and Agriculture Organization, June 21, 2016, accessed September 10, 2018, http://www.fao.org/news/story/en/item/419189/icode.
[35] Bethan McKernan, “Yemen Civil War: Saudi Expulsion of Yemeni workers Swells Houthi Ranks,” The Independent, March 11, 2018, accessed August 13, 2018, https://www.independent.co.uk/news/world/middle-east/yemen-civil-war-saudi-arabia-houthi-yemeni-workers-expel-deport-fighters-recruitment-al-qaeda-a8248506.html.
[36]OCHA, Yemen Humanitarian Needs.
[37] In 2014 the FAO proposed a US$145 million budget for its 2014-2018 Plan of Action for Yemen; see Food and Agriculture Organization, Yemen: Plan of Action 2014-2018 (Rome: Food and Agriculture Organization, 2014), 7, http://www.fao.org/fileadmin/user_upload/emergencies/docs/PoA%20Yemen_web%20(en).pdf. From 1990-2013, the FAO contributed roughly US$60 million to agricultural programming in Yemen; see Food and Agriculture Organization, FAO Country Programming Framework (CPF) Republic of Yemen (Rome: Food and Agriculture Organization, 2013), 12, accessed September 10, 2018, http://www.fao.org/3/a-bp587e.pdf. The World Bank, for its part, allocated US$43 million to its Rain-Fed Agriculture and Livestock Project from 2006-2014; see World Bank, Yemen – Rainfed Agriculture and Livestock Project (Washington, DC: World Bank Group, 2015), accessed September 10, 2018, http://documents.worldbank.org/curated/en/738111468320937724/Yemen-Rainfed-Agriculture-and-Livestock-Project.
[38] Waseem A. Abdulameer, “The Mineral Industry of Yemen,” United States Geological Survey, 2014, accessed September 10, 2018, https://minerals.usgs.gov/minerals/pubs/country/2014/myb3-2014-ym.pdf; World Bank, Yemen Mineral Sector Review, Report No. 47985-YE (Washington, DC: World Bank, June 2009), accessed September 10, 2018,
[39] Joel Baker et. al., “Petrogenesis of Quaternary Intraplate Volcanism, Sana’a, Yemen: Implications for Plume-Lithosphere Interaction and Polybaric Melt Hybridization”, October 1997, Journal of Petrology 38(10), accessed October 3, 2018, available at https://www.researchgate.net/publication/236268374_Petrogenesis_of_Quaternary_Intraplate_Volcanism_Sana%27a_Yemen_Implications_for_Plume-Lithosphere_Interaction_and_Polybaric_Melt_Hybridization?enrichId=rgreq-4aa9ee1632a1515ac81d6469727b9274-XXX&enrichSource=Y292ZXJQYWdlOzIzNjI2ODM3NDtBUzoxMDIzOTk0ODYyMDE4NjNAMTQwMTQyNTM1MTQ0Nw%3D%3D&el=1_x_3&_esc=publicationCoverPdf
[40] OCHA, Yemen Humanitarian Needs, 8.
Even before the current conflict, private sector development in Yemen faced many severe and interrelated challenges. These included bureaucratic obstructions, weak infrastructure, a largely unskilled workforce, a poor investment climate and lack of financing, an economy overly dependent on oil, corruption, a weak state, and a rent-seeking elite class with vested interests in stifling reforms. Now, after almost four years of civil war and regional military intervention, Yemen’s economy has been devastated and the private sector with it. And yet many business continue to operate; indeed, the private sector’s resilience is a major reason that the country’s humanitarian crisis – the largest in the world – is not precipitously worse.
In the event of an end to the conflict, rapid investment and development of the private sector will be necessary to create jobs, rebuild infrastructure, shift the flows of finance away from the war economy and back to formal markets, and to help bring overall socioeconomic stability that will contribute to a durable and long-lasting peace. Preparations for such must thus begin with urgency in order to be ready to seize the window of opportunity that will open immediately after the guns go silent.
With this in mind, this policy brief, based on a more extensive white paper[1] , assesses the factors weighing on private sector development in Yemen over time. It lays out the impacts of the 2011 uprising in Yemen, the ensuing political crisis and the current conflict on the economy and the private sector. Following this, recommendations are offered to both the Yemeni government and international stakeholders regarding steps that can be taken to revive and develop the private sector post conflict.
Yemen has spent much of the past 60 years embroiled in armed conflict and political crisis, with this cyclical instability and insecurity among the primary factors that has stymied both private sector maturation and the establishment of a strong state with well functioning public institutions. The vast majority of the Yemeni private sector is made up of small or very small businesses, even while providing almost 70 percent of working Yemenis with their livelihood. Rural agriculture has traditionally provided work for more than half the population.[1]
Yemen’s Central Statistics Organization, for instance, previously estimated that 97 percent of the Yemeni private sector was made up of micro, small and medium sized enterprises, which it defined as businesses employing less that than 25 people. Meanwhile, a 2000 World Bank report estimated that only 1 percent of private sector industrial firms employed 10 or more people, and that there were “very few” large enterprises.[2] Industrial centers were located in and around Sana’a, Taiz, Aden and Hudaydah, with output serving almost exclusively domestic consumption.[3]
Since the discovery of commercially viable oil fields in the mid-1980s and the ramping up of oil production in Yemen through the 1990s, the country’s annual gross domestic product (GDP) has been heavily influenced by its oil production levels and the volatility of global energy markets. Between 1995 and 2005, the private sector share of total GDP fluctuated as much as 10 percent year-to-year (dropping from 66 percent to 56 percent in 1995-96), while over this same decade the private sector share of non-oil annual GDP remained almost a constant 74 percent, not fluctuating more than one percent year-on-year.[4] From 1995 to 2005 Yemen averaged roughly 5 percent GDP growth per year, which saw the value of the non-oil private sector contribution to GDP rise from US$2.81 billion to US$8.38 billion (in current US$).
Yemen’s oil production, while small compared to its Gulf neighbours[5], has been significant enough in the local context to be the country’s largest source of foreign currency and to afflict the non-oil private sector with a version of the “Dutch Disease.”[6] The foreign currency coming into Yemen from oil sales – magnified by the fact that remittances were the second largest source of foreign currency – helped stabilize the domestic currency at a higher exchange rate than would be warranted otherwise. This elevated the cost of other possible exports, diminishing their competitiveness internationally and inhibiting the private sector’s development of export-led growth. The higher value of the Yemeni rial also made imports relatively cheaper, again undercutting the development of domestic industry. Additionally, there was essentially no export financing services available in Yemen.[7] Thus, between 1995 and 2005, non-oil exports accounted for an average of just 12.5 percent of total exports.[8]
These factors – relatively cheap imports and little domestic industry – combined to leave Yemenis heavily dependent on imports to meet almost all their commercial and industrial needs. Yemen has for decades imported on average 90 percent its food requirements.[9] Even in years when there was substantial decreases in GDP due to oil market volatility there was only an incremental drop in imports, despite the lower value of the YR in these years.[10] This inelasticity in import demand demonstrates the extent to which Yemen is import dependant to meet the population’s basic needs.[11]
Historically, the few laws that both existed and were enforced regarding the private sector tended to inhibit development. As an example, the World Bank noted in 2000 that Yemen had relatively high nominal import tariffs, as well as an unwieldy and badly organized customs regime, which created a “restrictive environment” and raised the time and costs of securing capital inputs.[12] At the same time, state regulation was weak or non-existent in many other areas, with no government policy to curb anti-competitive behavior, little official enforcement of property rights or contractual obligations, and a judiciary with a “strong anti-commercial bias.”[13]
Available infrastructure also clearly showed Yemen to be amongst the least developed countries in the world: only 40 percent of the population had access to clean drinking water, with the water supply per capita only 2 percent of the global average; just 35 percent of Yemenis had access to electricity, and even those connected to the national grid suffered regular prolonged blackouts; telecommunications penetration was “very low”; paved roads were less than 10 percent of the total road network, much of the remaining roads were in poor condition and/or inaccessible in rural areas, which left large segments of the population isolated from services and the wider economy.[14] Access to education and medical services was also poor, with Yemen having a 56 percent adult literacy rate and only 55 percent of the population able to readily access medical services.[15]
Given the lack of domestic wealth in Yemen, the World Bank also identified foreign direct investment (FDI) as being crucial for the country’s development. The Bank noted, however, that:
“Potential large-scale investors face a considerable amount of unnecessary regulations and licensing, a legal environment which is often unclear or not consistent with international norms, and an often unresponsive or corrupt civil service. They are also discouraged by the lack of dependable jurisprudence, enforceable contracts, secure land titles, predictable taxation or tariff protection, and in some cases physical infrastructure and physical security.”[16]
Although difficult to quantify, a major obstacle facing reforms in Yemen was, and remains, the country’s political economy. As the World Bank noted:
“The country has long been hostage to a short-term rent-extraction frenzy by multiple elites who have undermined any possibility of sustainable development, have been able to distort economic policy and block reforms, and have continued to seek rents aggressively that might otherwise have been recycled into development. This has occurred in the most profitable or most strategic economic subsectors such as oil and gas, agriculture, water, telecommunications, and financial services.”[17]
Essentially, former President Ali Abdullah Saleh purchased the authority to govern from the country’s political and tribal elites through patronage, access to state resources, and the distribution of spheres of authority – such as within government ministries or access to markets – within which the beneficiaries could foster their own fiefdoms of control and means of wealth accumulation. These groups and individuals had a vested interest in preventing newcomers from challenging them, and access to political machinations necessary to prevent these challenges.[18] For example, rules governing access to credit were used to prevent new businesses from entering the market and to benefit the existing dominant companies. Likewise, companies unaffiliated with the political elite would find themselves unable to secure government contracts.[19]
There has also been some progress in the past 25 years: some import barriers have been removed and customs tariffs simplified; reforms to business registration and the elimination of minimum capital requirements brought down the time and cost to start a business; corporate taxes were reduced significantly and harmonized; there was a marked decrease in property related disputes; the market for Islamic banking services was opened; the government established a credit registry and introduced a Microfinance Banking Law.
In 2011, Yemen entered a period of political crisis and profound instability when a popular uprising occurred against the regime of Ali Abdullah Saleh, Yemen’s president for more than 30 years. The impact on the economy was dramatic. Between 2010 and 2011 Yemen’s GDP growth dropped from 7.7 percent to -12.7 percent.
A World Bank survey of Yemeni businesses published in September 2012 found that more than three quarters reported that the severity of electricity shortages, political instability, corruption and general economic uncertainty had increased. The same survey found that more than 40 percent of businesses had shed 40 percent of their staff or more and lost more than half their sales. According to the survey’s authors: “These effects were found to be more pronounced for small businesses over the medium and large businesses, likely reflecting the more limited coping mechanisms and shallow financial resources available to small businesses.”[20]
Saudi Arabia intervened in 2012 with a $3 billion injection of cash and fuel in Yemen’s economy, allowing the country’s GDP to rebound in 2013 to 4.8 percent growth. The government, however, continued to run a deficit in the range of 8 percent of GDP, due largely to the continued fuel subsidies and public sector wages, which accounted for more than half of government spending. In July 2014, transitional President Abdo Rabbu Mansour Hadi, heeding advice from the IMF, repealed the fuel subsidy. Fuel prices essentially doubled overnight and planned support for the lower socioeconomic strata of the population failed to materialize. The popular discontent this sparked was then seized upon by the Houthis and allied forces of former President Saleh – which had already made military advances near the capital – to enter Sana’a on a populist wave and quickly begin to seize control of government institutions and ministries. The capital exodus and economic uncertainty this spurred then caused Yemen’s GDP growth to drop to 2 percent in 2014.
By March 2015, the Houthis and allied forces were besieging the southern port city of Aden and President Hadi had fled to the Saudi capital, Riyadh. That month Saudi Arabia, the United Arab Emirates and a coalition of other Arab states then launched a military intervention in Yemen in support of Hadi and the internationally recognized Yemeni government. The coalition and associated forces quickly drove the Houthis from Aden and other southern governorates before their advances stalled, with the frontlines becoming generally static and a war of attrition settling in for most of the next three years. During this time the Houthis maintained control of most of the country’s north, its largest population centers and Yemen’s busiest import hub, which are the ports of Hudaydah and nearby Saleef on the northern Red Sea coast.
The impact of the conflict on Yemen’s economy and private sector have been calamitous. Economic output has dropped precipitously in successive years, with a 17.6 percent contraction in 2015, a 15.3 percent contraction in 2016 and a 14.4 percent contraction in 2017, entailing a cumulative 40.5 percent drop in goods and services output over three years.[21] Myriad factors have played into, and been exacerbated by, this general economic collapse. Yemen’s oil exports were suspended from shortly after the coalition intervention, decimating public revenues and cutting off the government’s primary supply of foreign currency. Although since August 2016 some oil exports resumed, they have been irregular and in smaller quantities. The depletion of reserves and a domestic cash liquidity crisis in turn led to the suspension of most public sector salaries in August 2016 and ended CBY import financing. Coupled with the relocation of the central bank headquarters from Sana’a to Aden in September 2016, this crisis hobbled the CBY’s ability to protect the value of the Yemeni rial (YR).[22]
The rial thus fell from YR 215 to US$1 at the beginning of the conflict to YR 490 to US$1 as of the end of June 2018. With currency depreciation, the price of imports has spiked and per-capita purchasing power has plummeted. The price of imports has also been heavily affected by a coalition sea blockade of (and now military operation to retake) Houthi-held ports – most significantly Hudaydah and Saleef – which has dramatically reduced commercial and humanitarian deliveries through these ports, and increased the time and cost of delivery for those imports that do get through. All of these factors have led to a situation today where 8.4 million Yemenis are on the edge of famine and 22 million are in need of humanitarian support[23], in what the United Nations has called the world’s largest humanitarian catastrophe.[24]
Increased costs for businesses have been spurred by a lack of security and a scarcity of business inputs, while a loss of customer base and demand as well as general purchasing power decline has driven a loss in revenue.[25] Physical damage to public and private infrastructure has also severely affected the ability of businesses to operate.[26] As of 2017 these losses associated with the conflict had let to private sector businesses on average cutting their working hours in half, with layoffs estimated to affect 55 percent of the workforce. Meanwhile, more than a quarter of private sector firms engaged in industry, trade and services have ceased to operate.[27] Foreign currency shortages and problems with domestic currency liquidity, as mentioned previously, have also raised costs for importers.[28]
As the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) stated in December 2017:
“the agriculture sector has been severely constrained by a shortage of agricultural inputs, particularly vaccines, drugs, feeds and other essential commodities for the livestock and poultry sector. The price of poultry feed concentrates increased by 70 per cent, since the beginning of the crisis. The doubling fuel price has increased irrigation costs and water prices, forcing more farmers to abandon their farms and further exacerbating loss of livelihoods.”
Importantly, agriculture and fisheries were sectors previously employing more than 54 percent of the rural population and were the primary means of income for almost three quarters of Yemenis. Damages to these sectors has thus harmed the livelihoods of 1.7 million rural households.[29]
In previous studies of impact of conflict on a country’s private sector, it was found that war tends to create a power vacuum that allows space for illegal trade and the rise of a ‘war economy’, in which grey and black market actors accrue large sums of liquidity, and draw such out of the formal economy. Even once peace is achieved, doubts regarding its durability classically dissuade investments in the country, in particular investments in fixed, illiquid assets. However, without private sector development, reconstruction, rehabilitation and socioeconomic and stability are highly unlikely post conflict.
An incipient private sector cannot be expected to, of itself, redevelop and drive economic growth immediately after conflict resolution. Thus, this paper makes the following recommendations to the Yemeni government and international stakeholders regarding economic interventions to spur post-conflict private sector development in Yemen:
Yemen’s multifaceted and prolonged conflict has weakened both the formal state and formal private sector activity. In doing so it has allowed the emergence of new players in the gray or black markets in what could be described as a ‘war economy’ – where competition is largely shaped by the intersection of interests of fighting parities to fill the state vacuum. This complexity creates the need to design well-thought-out early interventions, ones that avoid reinforcing tensions or empowering businesses and informal actors that have thrived on the conflict to continue their dominance over private sector activities, which will curb the sector’s development over the longer run. In other words, early interventions should be conflict sensitive, inclusive, and pave the way for longer-term private sector development efforts.
International actors intervening on the ground should establish an inclusive mechanism in which local business actors are meaningfully engaged to create strong buy-in in enhancing peacebuilding and enabling appropriate business environments. Experiences of some countries including Rwanda, South Africa, and Sri Lanka have shown that the private sector could play a crucial role in the peacebuilding process and that economic recovery programs achieve good outcomes when local players are empowered to shape the institutional needs for implementing these programs.
In the event of a successful cessation of hostilities, international stakeholders should aim to step up their efforts on the ground to respond to the humanitarian crisis and participate in the developmental reconstruction process. In doing so, they should work to ensure that local businesses have the necessary tools and requisite skills to take advantage of international interventions and meet their set standards for involvement, while intervening to deliver humanitarian aid and support longer-term infrastructure projects. This should include facilitating the transfer of knowledge, specifically knowledge related the use of technology in business, through providing education and training programs for Yemen’s private sector labor force.
There are certain promising sectors and enterprises in Yemen that should be a key priority of international actors to support in the aftermath of the conflict. Allocating funds to reconstruct Yemen’s infrastructure – such as the construction and maintenance of roads, electricity power plants, water and sanitation networks and similar infrastructure projects – would serve as a fast channel for funds, create many jobs, enhance sustainable local development, and help prevent unemployment or poverty from spurring the return of combatants to the battlefield. International stakeholders should also assist the Yemeni government in building its capacity to properly manage public investment projects and efficiently deploy funds earmarked for reconstruction.
The agriculture sector, which employed the largest portion of the Yemeni workforce prior to the conflict, has been particularly adversely impacted by the dynamics of the war in Yemen and should be the target of any early intervention to boost the economy.[30] For instance, programs could be established to support microbusinesses in agriculture and offer training and technical assistance for farmers and those hoping to establish small-scale and self-sustaining projects.
Moreover, private actors could assist the government and international donors in developing joint financial mechanisms to finance SMEs and business incubators. These should also specifically target and assist women and youth to start businesses, given how underrepresented these groups are in private sector activities.
A functioning banking system is crucial for strengthening the role of the private sector in Yemen, which is largely a cash-based economy. Since the outbreak of the war in Yemen, many businesses have either laid off employees or were forced to suspend their operations. The liquidity crisis has driven cash assets from the formal banking sector to the black market, leaving banks handicapped and unable to function properly. Over the short run, the Yemeni government and all relevant stakeholders should support a full return of a functioning financial sector – including stabilizing the CBY and empowering it to perform its monetary mandates. Over the longer run, efforts should be directed to lead reforms on banking regulations and ensure an appropriate platform for foreign investors to establish banks in country, as well as for remittance inflows. In this regard, the Yemeni government should establish for a mechanism for investment guarantees in order to attract the remittances of the Yemeni diaspora to contribute to country economic recovery.
This has a high potential to attract the accumulated capital of Yemeni expatriates, many of whom are at risk of being forced to return to Yemen by ongoing Gulf Cooperation Council nationalization policies to localize Gulf labor markets. Returning Yemenis could be encouraged to set up new enterprises, or place their savings in Yemeni government foreign currency bonds, which would both provide the public sector with badly needed funds while also allowing the individuals to protect their investments from depreciation.
In addition, Yemen’s experienced microfinance institutions should be a key target of all stakeholders for driving more financial inclusion across Yemen. Microfinance banks and companies should be also empowered to offer financial services for individuals and cash management services for smaller businesses. Moreover, mobile banking in Yemen should be enhanced to expand access to low-income borrowers.
This entails physical security, but it also implies a just and effective rule of law – in particular regarding property rights, contract enforcement and arbitration, and general market regulation. There must be sufficient political and legal stability to create a conducive environment for investment flows. While the conflict continues, many businesses have experienced double tariffs on imports or the double taxation of businesses operating in regions held by different belligerents, hampering the work of the private sector
Once the environment for investments is secure, the government should establish a business-friendly taxation system. This means a taxation level that accounts for the need to attract investment while also recognizing the state’s need to raise revenues for public investment, while also reinvesting in and empowering the public revenue agency to ensure that the taxes due are actually collected, with this latter point also requiring the establishment of effective anti-corruption institutions. The government should also encourage investments through easing some regulations that restrict foreign investments and discourage business startups. In particular, the government should engage with and invest in transformative sectors such as transportation, financial services, telecommunications, tourism, power production, and food processing and distribution.[31]
Notes:
[1] International Labor Organization, Yemen Labour Force Survey 2013-14 (Beirut: ILO Regional Office for Arab States, 2015), accessed October 10, 2017, http://www.ilo.org/beirut/publications/WCMS_419016/lang–en/index.htm. The ILO’s survey in Yemen defined working-age as persons older than 15 years.
[2] World Bank, Yemen: Comprehensive Development Review, Private Sector Development Building Block. Washington, DC: World Bank, 2000. Accessed June 14, 2018. http://documents.worldbank.org/curated/en/458221468345852637/pdf/335760YE1Private.pdf
[3] World Bank, Yemen: Comprehensive Development Review.
[4] Central Statistical Organization in Yemen, The Structure Of GDP By Economic Activity At Current Prices For 2000 – 2016 (%), table No. 7.
[5] At the peak of Yemen’s oil production in 2001, the country produced some 21 million tonnes of oil. That same year Oman produced 50 million tonnes, Saudi Arabia produced 390 million tonnes and the United Arab Emirates produced almost 103 million tonnes of oil. Comparative data sourced from International Energy Agency Statistics Search, accessed June 29, 2018, https://www.iea.org/statistics/statisticssearch.
[6] According to Investopedia: “Dutch disease is an economic term that refers to the negative consequences arising from large increases in the value of a country’s currency. It is primarily associated with a natural resource discovery but can result from any large influx of foreign currency into a country, including foreign direct investment, foreign aid or a substantial increase in natural resource prices.” See “Dutch Disease, Investopedia, accessed July 2, 2018, https://www.investopedia.com/terms/d/dutchdisease.asp.
[7] World Bank, Yemen: Comprehensive Development Review.
[8] Based on historical data of the structure of GDP by economic activity, provided by the Central Statistics Organization in June 2018.
[9] Mansour Rageh, Amal Nasser, and Farea Al-Muslimi, “Yemen Without a Functioning Central Bank: The Loss of Basic Economic Stabilization and Accelerating Famine,” Sana’a Center for Strategic Studies, November 2, 2016, accessed June 29, 2018, http://sanaacenter.org/publications/main-publications/55.
[10] World Bank, Yemen: Comprehensive Development Review.
[11] World Bank, Yemen: Comprehensive Development Review.
[12] World Bank, Yemen: Comprehensive Development Review.
[13] World Bank, Yemen: Comprehensive Development Review.
[14] World Bank. Yemen – Country Assistance Strategy. Washington, DC: World Bank, 1999. Accessed June 21, 2018. http://documents.worldbank.org/curated/en/934971468781522276/pdf/multi-page.pdf.
[15] World Bank, Yemen – Country Assistance Strategy.
[16] World Bank, Yemen: Comprehensive Development Review.
[17] World Bank, The Republic Of Yemen: Unlocking the Potential for Economic Growth (Washington, D.C. : World Bank, 2015), accessed June 29, 2018, http://documents.worldbank.org/curated/en/673781467997642839/pdf/102151-REVISED-box394829B-PUBLIC-Yemen-CEM-edited.pdf.
[18] As an example of the elite nature of the Yemeni economy, Ginny Hill et al. published a study in 2013 estimating that roughly 80 percent of the import, manufacturing, banking, and telecommunications sectors in Yemen are in the hands of only 10 families. See: Ginny Hill et al., Yemen: Corruption, Capital Flight and Global Drivers of Conflict (London: Chatham House, 2013), accessed July 2, 2018, https://www.chathamhouse.org/sites/files/chathamhouse/public/Research/Middle%20East/0913r_yemen.pdf.
[19] Hill, Ginny, Peter Salisbury, Léonie Northedge and Jane Kinninmont. Yemen: Corruption, Capital Flight and Global Drivers of Conflict. London: Chatham House, 2013. Accessed June 25, 2018. https://www.chathamhouse.org/sites/files/chathamhouse/public/Research/Middle%20East/0913r_yemen.pdf.
[20] Andrew Stone, Lina Badawy and Nabila Assaf, The Plight of Yemeni Private Enterprises since the 2011 Crisis: A Rapid Assessment (Washington, DC: World Bank, 2012), accessed July 2, 2018, https://openknowledge.worldbank.org/handle/10986/16167.
[21] Data from Yemen’s Ministry of Planning and International Cooperation, as cited in: United Nations Office for Humanitarian Affairs (OCHA), Yemen Humanitarian Needs Overview 2018 (United Nations Office for Humanitarian Affairs, December 2017), accessed June 29, 2018, https://www.unocha.org/sites/unocha/files/dms/yemen_humanitarian_needs_overview_hno_2018_20171204.pdf.
[22] Rageh, Nasser and Al-Muslimi, Yemen Without a Functioning Central Bank.
[23] OCHA, Yemen Humanitarian Needs.
[24] “Yemen at the UN – January 2017 Review,” Sana’a Center for Strategic Studies, Februrary 21, 2017, accessed on June 29, 2018, http://sanaacenter.org/publications/yemen-at-the-un/74.
[25] Ali Azaki, “International Aid Organizations and the Yemeni Private Sector: The Need to Improve Coordination in Humanitarian Crisis Response,” Sana’a Center for Strategic Studies, March 16, 2018, accessed June 29, 2018, http://sanaacenter.org/publications/main-publications/5528#_ftn6.
[26] According to the UN OCHA: “From 1 October 2016 to 30 September 2017, a total of 8,878 conflict-related incidents, including airstrikes, armed clashes, and shelling, were reported throughout Yemen. Approximately 82 per cent of these incidents took place in five governorates: Taizz, Sa’ada, Al Jawf, Hajjah, and Sana’a.” See: OCHA, Yemen Humanitarian Needs.
[27] World Bank, Toward a Blueprint for the Recovery and Reconstruction of Yemen – October 2017, as cited OCHA, Yemen Humanitarian Needs.
[28] OCHA, Yemen Humanitarian Needs.
[29] OCHA, Yemen Humanitarian Needs.
[30] Researcher interview with senior official at the Ministry of Agriculture and Irrigation in Yemen, June 30, 2018.
[31] World Bank, Toward a Blueprint for the Recovery and Reconstruction of Yemen (Washington, D.C.: World Bank, 2017).
Local councils are among Yemen’s most important state institutions. Responsible for providing basic public services to millions of Yemenis, local councils represent official governance and the Yemeni state for much of the population. The intensification of the conflict between the internationally recognized government, its regional backers and the Houthi group since March 2015, however, has heavily impacted funding and security for local councils, undermining their ability to provide services effectively in most areas of the country.
In many areas, this absence of effective official governance has created fertile ground for non-state actors to exert their influence. In the areas under Houthi control, Houthi supporters closely monitor local council activity. In the southern coastal city of Aden, local councils are caught among competing armed militias that form part of a broader power struggle between southern secessionists and the internationally recognized Yemeni government.
Despite the challenges they face, local councils remain important instruments for coordinating humanitarian relief efforts and local-level conflict mediation. In the absence of central state authority, a number of effective local, self-governance models have emerged, notably in Marib and Hadramawt governorates. At some stage a new system of governance will need to be drawn up to reflect the new realities on the ground; these models may indicate a way forward. Local councils are among the best-equipped and best-established institutions to support a shift away from the previous centralized model.
The currently reduced capacity of local councils is cause for much concern as the conflict rages on and Yemen’s economic and humanitarian crises deepen. Irrespective of how the conflict progresses, it is imperative that local, regional and international actors seek not merely to keep local governance structures from collapse but to enhance the capacities of local councils in post-conflict scenarios.
Local councils are among Yemen’s most important state institutions. Responsible for providing basic public services to millions of Yemenis, local councils represent official governance and the Yemeni state for much of the population. The intensification of the ongoing conflict between the internationally recognized government and the Houthis since March 2015, however, has heavily impacted funding and security for local councils, undermining their ability to provide services effectively in most areas of the country. The reduced capacity of local councils to function is cause for much concern as the conflict rages on and Yemen’s economic and humanitarian crises deepen.
With an aim to inform stakeholders on options for supporting local councils in the near and long term, this policy brief, which is based on a more extensive White Paper , provides insight into the current challenges that local councils face. The first section provides a view of how local governance throughout Yemen is evolving amid conflict and instability. As the conflict creates a political and security vacuum, non-state actors have stepped in to provide services at the local level. Despite the conflict’s negative impact on their ability to operate, however, local councils have acted to coordinate humanitarian aid and to mediate conflict at the local level. In the north, Marib governorate has pushed for greater local autonomy, and, like Hadramawt in the south, has achieved a degree of success in effective self-governance.
Regardless of how the conflict progresses, stakeholders in Yemeni governance must seek not merely to prevent local governance structures from collapse, but also plan in advance to enhance the capabilities of local councils in post-conflict scenarios. As such, the third section of this brief provides recommendations for local, regional and international actors to support local councils in the short term while building towards a longer-term post-conflict stability.
In many areas of Yemen, as the political and security vacuum has widened, local power brokers, including local authorities, have begun to operate with a greater degree of autonomy. Local actors have become increasingly disconnected from developments occurring elsewhere in the country and are more inclined to pursue their own agendas, at times with the support of their respective regional backers. This has led to a rise in non-state actors exerting their influence in local affairs, including the Houthis and a growing variety of actors in southern Yemen.
As the conflict has unfolded and the state’s already limited ability to provide services and security for its citizens has continued to erode, in many areas civilians’ trust in local councils has fallen. In the absence of effective formal governance non-state actors — often armed groups — with greater resources at their disposal have increasingly exerted influence in local affairs.
In Yemen’s north, with the exception of Marib and al-Jawf, the Houthis have exerted influence at the local level through so-called “Popular Committees”.[1] Although the Houthis have not made any substantial changes to the local governance framework, they have at times redirected funds earmarked for local development projects. They monitor local councils located in areas under their control to ensure local councils distribute revenue and channel external humanitarian aid consistent with the agenda set by the Houthi leadership.
In 2015, al-Qaeda in the Arabian Peninsula (AQAP) took control of Mukalla in Hadramawt governorate. AQAP integrated itself among local communities by providing social welfare programmes and supplying Mukalla with food and water despite shortages in other areas.[2] Although AQAP’s presence was not unopposed, the group continued to govern until its withdrawal from Mukalla in April 2016.[3] After AQAP’s withdrawal, local authorities in the city struggled to provide services and now depend on external support from international organizations and the Saudi-led coalition.
In other cases, militias fighting on the same side of the conflict nonetheless act in competition when it comes to local governance. In Taiz governorate, where Houthi-Saleh forces began laying siege to Taiz city in March 2015, the Saudi-led coalition, and particularly the UAE, has assisted the rise of Salafi militias. The UAE’s reluctance to engage with Islah — due to the party’s links with the regional Muslim Brotherhood — meant that it turned to other anti-Houthi groups, such as the militias headed by Salafi military commander Adel Abdu Farea, more commonly known as Abu al-Abbas.[4] The UAE’s support of Abu al-Abbas fuelled animosity between his men and Islah-affiliated militias, which on several occasions has led to the outbreak of clashes between these supposedly pro-government factions as they compete for influence on the ground.[5]
The 2015 Houthi-Saleh takeover of several southern districts was debilitating for local institutions providing public services. After retaking these areas, the Saudi-led coalition — and the UAE in particular — assisted in restoring some services. However, the coalition’s backing of multiple, sometimes competing authorities in different sectors, especially security, generated tension and made effective local governance difficult.[6]
As in Taiz, local councils in Aden have been forced to withstand the pressure of regular infighting among competing armed groups. In the southern port city of Aden and across south Yemen more broadly, the conflict has intensified calls for the establishment of a new, independent southern state. The UAE has supported various political and security actors who advocate for southern independence.[7]
In April 2017, Yemeni President Abdo Rabbu Mansour Hadi, objecting to the UAE’s ties to southern secessionists, fired a number of southern leaders from his government. The following week these leaders formed the Southern Transitional Council (STC) and rapidly began establishing a parallel structure for local governance across southern Yemen.[8] As the local clout of southern secession leaders has increased, the standing of the Hadi government has decreased. Critics of the Hadi government claim that public service delivery in Aden is being held up by the government’s economic mismanagement and outright corruption.
The continued competition between secessionist forces and Hadi loyalists is destabilizing for local councils in southern Yemen. Animosity in Aden between local UAE-backed forces and other armed factions loyal to Hadi has repeatedly boiled over, with the most recent of many clashes occurring at the end of January 2018. Clashes between the two groups prevent local councils from operating in a secure environment.[9] Aside from the threat of violence, local councils are vulnerable to interference by armed militias eager to assert themselves at the local level.
At the same time, both sides actively interfere in the work of local council members in order to advance their own agendas. Interviews with local council officials reveal some of the challenges facing their work in Aden:[10]
As the overarching conflict has intensified and spread in the past three years, there has been a breakdown in local security. Local police forces and the branches of the judiciary that once helped to maintain a degree of order at the local level have been unable to provide a secure environment in which local authorities can operate. At the same time, local councils have lost much of their funding: in 2015, the internationally recognized Yemeni government, experiencing a sharp reduction in oil and gas revenues due to the conflict, halved the funds it provides to local councils.[11] The January 2018 budget limited the funds allocated to local authorities to paying salaries and covering only 50 percent of operational expenditures.[12] The deterioration of the Yemeni economy has left most local councils unable to collect utility taxes, permit fees, or zakat revenues.[13] While some local councils receive donations from Yemeni businessmen and institutions, most are left without the funds to provide services. The lack of funds has been particularly marked for local councils located in Houthi-controlled areas, due in part to redirection of funds by the Houthis. [14]
However, despite struggling to provide services, local councils have helped to coordinate the flow of external humanitarian aid during the conflict. In a number of governorates, local council members transmit information to international non-governmental organizations (INGOs) through semi-informal communication channels, assisting with humanitarian needs assessments. They have also helped to prevent the spread of cholera by channelling external support to local health facilities. In some instances, local councils in Yemen have played a role in facilitating conflict resolution at a local scale, coordinating local ceasefires, ensuring safe passage of humanitarian aid across frontlines, or organizing prisoner exchanges between warring parties.[15]
Hadramawt, in eastern Yemen, is the country’s largest governorate and most prolific oil producer.[16] Many in Hadramawt have long been frustrated with the lack of oil revenues reinvested into the governorate. Hadramawt’s desire for greater control over — and an increased share in — its own economic resources was one of the central demands made at the Hadramawt Inclusive Conference (HIC) held in April 2017.[17] Since its establishment, HIC and other members of Hadramawt’s socio-political elite have made the governorate’s participation in any future federal state — or an independent southern state — contingent upon it receiving a larger share than it currently does of the revenues from it own resources. Specifically, the HIC demands that 20 percent of oil revenues extracted from Hadramawt be reinvested back into the governorate.[18] It is highly unlikely that local Hadrami officials would be willing to adhere to the former decentralization mechanism defined by the Local Authority Law (LAL) of 2000, which is the legal framework that formally established local councils as government entities.[19]
The internationally recognized government appears to be taking seriously Hadrami demands for a greater share of resource revenues: it now pays the Hadramawt Tribal Confederation (HTC) and Petro Masila, the local oil company that runs the Masila (Block 14) oil field, for access to the field.[20] It also sends payments of cash or fuel to local authorities and the UAE-backed Hadramawt Elite Forces in the coastal city of Mukalla for access to the oil export facilities located there.[21] These payments help to lessen the burden on local councils.
There is also a substantial network of wealthy Hadrami businessmen living in neighbouring Gulf countries; during the conflict, these businessmen have played a significant role in financially assisting local councils to provide services and implement local development projects.
These various revenue streams have thus allowed the authorities in Hadramawt to continue to operate – and with a degree of local autonomy – insofar as they are able to regularly pay civil servant salaries, invest in local services, and finance the development and maintenance of electricity, water and sewage infrastructure.
Prior to the current conflict, and despite the presence of vital energy resources, Marib lacked infrastructural development due to the central government’s monopolization of oil and gas revenues.[23] The current conflict has, however, led to a change in fortune for Marib. The protection offered by Saudi-led coalition forces, coupled with Marib’s own robust and united security apparatus, has allowed the governorate to enjoy a comparatively high level of security.[24] From this position of relative security, in mid-2017 Marib negotiated a deal with the internationally recognized Yemeni government for the governorate to keep up to 20 percent of revenues from oil extracted in the governorate, over which the central government had previously had a total claim.[25]
The agreement reflects a broader effort by Marib’s local governing authorities to take ownership of its oil, gas, and electricity facilities. Since the agreement, local councils have helped to keep energy facilities functional and to increase capacity through consultations with local stakeholders. They supervise the timely distribution of oil, diesel, and gas derivatives to Marib homes. Unlike many local councils in Yemen, they provide public services and coordinate local development projects.
Since taking control of a larger share of natural resource revenues, Marib’s relative economic boom has led tens of thousands of internally displaced persons (IDPs) to seek refuge in Marib.[26] Despite this influx, Marib is benefiting from a period of relative stability and sustained economic development. In Marib, civil servants are paid and public services are generally provided. Decision making in the local governance model generally includes consultations with various societal groups, even while the authorities remain intolerant of direct political dissent. The governorate has thus come to represent a unique and reasonably effective decentralized model of local governance in Yemen bolstered by the unity of the population, tight-knit security, and economic resources.
The inability of the central government during the conflict to respond to local needs prompted Hadramawt and Marib, two relatively resource-rich governorates, to exceed the legal mandate bestowed upon them by the 2000 Local Authority Law. In both governorates, there is an emerging model of local governance that other governorates could follow, whereby the local community has been more included in decision-making and managing local affairs than it was prior to the conflict, with this being facilitated by both the development of local resources and support from the central government.
Since their inception, local councils have been a critical governing institution in Yemen. However, the ongoing conflict has severely impacted their ability to provide essential services to their communities at a time when humanitarian and economic crises are worsening. In some areas, non-state actors compete to provide services, thereby undermining the trust of Yemeni citizens in local councils. In other areas, local authorities have evolved fairly successful forms of self-governance in the absence of an effective centralized government.
This policy brief has sought to illuminate the challenges faced by local councils during the ongoing conflict. Local, regional and international actors concerned to establish stable and effective governance in Yemen must actively support local councils to meet these challenges. Some current examples, such as Hadramawt and Marib, may guide the future shape of local governance in Yemen. Local councils should play an important role in any future post-conflict reconstruction process, but bolstering local councils should not wait until the end of the conflict. Given how critical a role local councils have played in governance for nearly two decades, they promise to be valuable partners in rebuilding trust and stability.
Regional and international stakeholders should coordinate efforts to restore the CBY to a fully functioning unified national entity. From the onset of political unrest in 2011 until just before the relocation of CBY headquarters in September 2016, the central bank played a vital role in maintaining local councils’ ability to deliver basic services by continuing to disburse civil servant salaries and helping to cover operational costs. It is currently difficult for local councils in any of Yemen’s 22 governorates — with the exception of Marib, and to a lesser extent Hadramawt — to secure sufficient operational revenues.
The international community should take constructive measures to develop a mechanism between the warring parties for the nationwide collection of state revenues such as taxes and customs. The re-establishment of public services in all areas would provide the incentive for the parties to collaborate in this effort. A state budget that reflects the current situation in Yemen will ensure that greater financial support is provided to local councils.[27] The Social Fund for Development (SFD), a quasi-governmental poverty reduction body, can channel allocated revenues to local authorities and can jointly implement public service projects.
International donors and INGOs should enlist local councils as liaison points with local organizations and private sector actors. This approach will increase the councils’ legitimacy and encourage the local community to unite under formal government structures. It may also create a more decentralized service delivery model, which in turn may extend the reach of reconstruction efforts. Any support filtered through the local councils must include an oversight mechanism to avoid misappropriation of funds.
The internationally recognized government should issue temporary regulatory instructions to devolve more of its powers officially to the governorate and district level by:
International stakeholders should target the implementation of local capacity-building programs that improve the performance of the local judiciary and security services. This may also entail financial support to rebuild and improve their capital infrastructure. This will allow judiciary and security services to operate effectively and maintain legitimacy. While acknowledging local complexities, international stakeholders should discourage parties to the conflict and regional players from intervening in the activities of the local judiciary or creating competing entities that undermine state legitimacy.
INGOs and other actors should support community-driven initiatives constructed in such a way that they reinforce the effectiveness of, rather than circumvent, official local government institutions. Promoting bottom-up, inclusive local governance will help to avoid claims of bias or discrimination while curbing the appeal of non-state actors as alternatives to the state.
A comprehensive and realistic assessment of which individuals and groups are in control at the governorate and district levels, as well as an assessment of these entities’ capacities to provide services, will help domestic policy-makers (with the support of the international community) to develop post-conflict strategies to restore state functions, such as the provision of security and public services.
Notes:
[1] Peter Salisbury, “Yemen: National Chaos, Local Order,” Chatham House, last modified December 20, 2017, accessed May 23, 2018. https://www.chathamhouse.org/publication/yemen-national-chaos-local-order.
[2] Thomas Joscelyn, “Arab Coalition Enters AQAP Stronghold in Port City of Mukalla, Yemen,” Long War Journal, last modified April 25, 2016, accessed May 23, 2018. https://www.longwarjournal.org/archives/2016/04/arab-coalition-enters-aqap-stronghold-in-port-city-of-mukalla-yemen.php; Elisabeth Kendall, “How Can al-Qaeda in the Arabian Peninsula Be Defeated?” Washington Post, last modified May 3, 2016, accessed May 23, 2018. https://www.washingtonpost.com/news/monkey-cage/wp/2016/05/03/how-can-al-qaeda-in-the-arabian-peninsula-be-defeated.
[3] Joscelyn, “Arab Coalition Enters AQAP Stronghold in Port City of Mukalla, Yemen.”
[4] “UAE, Saudi Send Weapons to Taiz Resistance,” Emirates 24/7 News, last modified January 7, 2016, accessed May 23, 2018. http://www.emirates247.com/news/region/uae-saudi-send-weapons-to-taiz-resistance-2015-11-07-1.609560.
[5]“عاجل: استشهاد حمزة المخلافي شقيق قائد المقاومة الشعبية بتعز (صورة [Breaking News: Martyrdom of Hamza al-Mikhlafi, Brother of the Popular Resistance Commander in Taiz], Al Mawqea, last modified April 23, 2016, accessed May 23, 2018. http://almawqea.net/news.php?id=7226#.V9k0FJN96lO; “عاجل.. الشيخ حمود المخلافي يكشف عن تفاصيل مقتل شقيقه بتعز” [Urgent: Sheikh Hamoud al-Mikhlafi Reveals the Details of His Brother’s Death in Taiz],” Ababiil, last modified April 23, 2016, accessed May 23, 2018. http://ababiil.net/yemen-news/82187.html; “قائد كتائب حسم يكشف عن ملابسات استشهاد حمزة المخلافي وتفاصيل المكالمة التي اجراها مع الشيخ حمود سعيد عقب الحادثة. [Commander of Haskat Brigades Reveals the Circumstances of the Martyrdom of Hamza al-Mikhlafi and the Details of the Call He Made with Sheikh Hamoud Said After the Incident],” Yemen 24, last modified April 24, 2016, accessed May 23, 2018. http://yemen-24.com/news27572.html.
[6] Researcher interview, Aden senior local council leader, May 2018.
[7] In Aden, and elsewhere across south Yemen, the UAE has assembled, trained, and continued to back a number of local security forces that operate with varying degrees of independence from the internationally recognized government. These forces include the Security Belt forces in Aden, Lahj, and Abyan governorates; the Hadramawt Elite Forces; the Shabwa Elite Forces; and the more recently formed al-Mahra Elite Forces.
[8] “Al-Zubaidi and the STC Members are in Al-Mukalla City,” Southern Transitional Council, 2017, accessed May 23, 2018. http://en.stcaden.com/news/7959. “Al-Zubaidi Issues a Resolution to Appoint Local Leaderships in Shabwah Governorate,” Southern Transitional Council, 2017, accessed May 23, 2018. http://en.stcaden.com/news/8084.
[9] Sana’a Center for Strategic Studies, “Yemen at the UN—January 2018 Review,” last modified February 11, 2018, accessed May 23, 2018. http://sanaacenter.org/publications/yemen-at-the-un/5389#Clashes_in_Aden.
[10] Researcher interview, Aden local council officials, May 2018.
[11] Baron et al., “Essential Role of Local Governance;” Oil production has declined annually since 2001. This has placed Yemen’s economy under increased pressure, despite the 2009 opening of Yemen’s liquified natural gas (LNG) terminal in the Balhaf, Shabwa governorate. In 2014, approximately 70 percent of the national budget came from Yemen’s oil and gas resources. Following the escalation of the conflict in March 2015, oil and gas production in Marib, Shabwa and Hadramawt governorates stopped, subsequently depriving Yemen of its major source of revenue. In 2015, there was a 54 percent year-on-year decrease in state revenues for the annual budget.
[12] Researcher interview with confidential source with close ties to CBY in Aden, June 2018.
[13] Zakat is an “Islamic tax” or financial obligation imposed on all Muslims who meet the necessary wealth criteria.
[14] Researcher interviews conducted with local council directors and members in Houthi-controlled areas, September 2017.
[15] Researcher interview, Ibb, October 2017; researcher interview, Marib, September 2017.
[16] In February 2014 oil from Hadramawt accounted for an estimated 53 percent of total oil production in Yemen. See World Bank, Republic of Yemen: Unlocking Potential for Economic Growth (Washington, DC: World Bank, 2015) accessed May 23, 2018. https://openknowledge.worldbank.org/handle/10986/23660.
[17] A total of 160 participants attended the conference, which led to the appointment of 52 members that make up the HIC executive decision-making authority.
[18] Researcher interview with Dr. Abulkader Ba Yazid, Secretary General of Hadramawt Inclusive Conference, Jordan, September 2017.
[19] Researcher interview with Dr. Abulkader Ba Yazid, Jordan, September 2017. The central government in Sana’a issued the Local Councils Law in 2000 as a way to try and address calls for greater regional autonomy, particularly among the Houthis in the north and the Southern Movement. The law stipulated that, while the central government would maintain control of foreign policy and national security – and would retain the ability to veto local action – local councils now had responsibility for running day-to-day affairs. The law effectively made local councils one of the most important public institutions in Yemen. Local councils were to be directly elected and were to have greater decision-making authority over financial resources and the implementation of development programs. Although oil and gas revenues remained in the hands of the ruling authorities in Sana’a, local councils were permitted to collect commercial taxes and to tax residents for the use of state-operated utilities such as water and electricity.
[20] Researcher interview with Yemen expert Peter Salisbury, March 5, 2018.
[21] Researcher interview with Yemen expert Peter Salisbury, March 5, 2018.
[22] Large portions of this sections are based on the following: researcher interviews with local council directors in Marib, November 2017; “Yemen’s Urban–Rural Divide and the Ultra-Localisation of the Civil War,” workshop organized by the London School of Economics Middle East Centre, March 29, 2017, London, UK.
[23] According to Yemen’s national statistics, less than 1 per cent of total government expenditures were allocated to Marib in 2015.
[24] Ben Hubbard, “As Yemen Crumbles, One Town Is an Island of Relative Calm,” New York Times, last modified November 9, 2017, accessed May 23, 2018. https://www.nytimes.com/2017/11/09/world/middleeast/yemen-marib-war-ice-cream.html; Adam Baron, “Not Only a Pawn in Their Game,” European Council on Foreign Relations, last modified November 16, 2017, accessed May 23, 2018. http://www.ecfr.eu/article/commentary_not_only_a_pawn_in_their_game.
[25] Despite the agreement between Marib and the internationally recognized government, as of this writing ongoing disputes between the CBY’s Marib and Aden branches has led to the Marib CBY refusing to deposit any rents from the governorate’s gas, oil and gasoline production in accounts at the Aden CBY.
[26] Marib-based journalist Ali Aweidhah, speaking to the researchers in June 2018, estimated that Marib’s population grew from some 240,000 people at the beginning of the conflict to some 2.4 million as of this writing.
[27] Researcher conversation with a source with close ties to the CBY in Aden, June 2018.