Following Up Yemen Economic Situation Since 1960s [Archives:2000/37/Business & Economy]

Situation Since 1960s
Dr. Abdulaziz
Al-Shawafi,
Prof. of Economic
Differences between economies of former Yemen Peoples Democratic Republic (PDRY) and Yemen Arab Republic before unification on May 22 Stemmed from the difference in ownership and development of production means following the revolutions of each part Yemen. British occupation helped the southern governorates enter the 1960s with a lot of capitalistic projects while governorates in the north were feudalistic. Nationalization policy adopted by the Yemeni Socialist Party in the southern part of Yemen created to some extent a kind of equality in distribution of land but failed to achieve a socialist economy, for it maintained many traditional agricultural features. Northern governorates were at the time inaugurating a number of trade and industrial projects, despite the fact that their economy was traditional. Production before the revolution depended heavily on agriculture, animal wealth besides wages system in modern fields.
We can say that at a time the PDRY inherited industries and modern offices from the British colonization, YAR started inauguration of modern projects in mid 1960s and early 1970s.
Republic of Yemen has not spared any efforts to strengthen the infrastructure of the northern as well as southern governorates. However, it is still far away from reaping fruits of those projects and develop them in a way that helps enhance the economic and social development process. For example, land transportation is still insufficient although a lot of roads have been asphalted. What adds insult to injury is the mountainous nature of the country and high cost of road building.
Sea transportation constitutes a great economic importance. Important ports in the republic located in the north are Hodeidah, Saleef, Mokka and Al-Katheeb seaports while Aden seaport is considered the main one, followed by Mukalla seaport. None can deny the vital role Air transportation plays in linking governorates of Yemen with one another in the absence of enough good roads.

Important Yemeni airports:
— International airports: Sanaa, Aden, Arrayan, Hodeidah and Taiz international Airports.
— Domestic Airports: Sayun, Al-Ghidha, Qashen, Beihan, Ataq, Socotra, Mukeiras, Al-Boqa and Mareb Airports.
In the sphere of telecommunication, 100,000 telephone lines had been linked in 1995. Mobile, mail, telex, facsimile and telegraph services are also available across the country.
Both Yemens have similar topographic relief. Men together with women in both work in production of grains and breeding animals. These activities are the main of the Yemeni peoples. Unclearly demarcated natural borders separated Yemenis despite their great similarity even in their economies.
In the early 1970s many bourgeoises, most of whom originally of a northern descent, moved their families and works to Taiz, Hodeidah and Sanaa after they had been in Aden city port during and after the World War II. They contributed to construction of the country through private investment during the second phase of the rise in Oil prices in 1973.
Both economies had a common thing represented by the emigration of manpower to the gulf states and other countries. Although remittances of those emigrants were the main source of hard currency, they were spent on luxurious imported products and building houses instead of investment. Both Yemens, and Yemen after unification, have been classified among the under-developed countries. The YAR was richer than PDRY, however, it suffered acute insufficiency in its current accounts that could not be curbed by remittances.
Mobilization and distribution of state revenues, which are the most influential factors in economic activities, are until now under administrative restraints and other non-economic factors all of which do not help proper utilization of such resources. The crux of the problem is similar to those in many developing countries.
Despite availability of human and natural resources: arable land, marine wealth, tourist potentials, oil, gas, manpower, etc. the extent of and manner of exploiting the are rather poor. Production and productivity rates and consequently income are still very low. As a result, investment level remains low as well.
Unemployment has become one of the most apparent economic and social problems, especially following its sharp rise by 35% as a result of recession on the market, the return of Yemeni emigrants and mushrooming population. Such circumstances add many restraints to economic and social development which necessitate a serious move to straighten the infrastructure.
There is a dire need of roads and ports to facilitate transportation of products and travel of manpower to and fro production and consumption areas. Industrial areas are also needed to be built in order to back up industry in the country.
Importance of establishing free zones lies in facilitation of trade and industrial activities at both domestic and regional levels. Improving water resources by, for example, damming up and rehabilitating old dams, protecting valleys and underground water and organizing the use of water, will help boost agricultural production. The country also requires enhanced electricity for productive and investment purposes and developed domestic as well as international telecommunication networks among industrial, economic, marketing and consumption centers.
To encourage investment, there should be a solid social structure. Basic and higher education, health and general services are all required for gearing towards developed economy. There has been an apparent disequilibrium represented by absence of any economic and social ties in the one place and between development programs and human resources in the other.
The PDRY and YAR adopted planning when they applied to membership in the IMF and WB. Central planning was at that a time a target sought by PDRY while it did not constitute a commitment to the YAR for which it was a prerequisite to join the IMF and WB. The first three-year plans, 1971-1974 for PDRY and 1973-1975 for YAR involved the public sector alone. Following plans were outlined for 5 years last of which was the five-year plan of 1996-2000 after unification.
The comparison of statistics available on contributions of private sectors to development of the two Yemens shows similar tendency towards development projects. Although the policy for YAR was based on the free market, the public sector contributed more than the private sector to the gross capitalistic structures. Statements of the PRDY at the time did not agree with the role of local and foreign projects.
Both are relatively poor with backward mechanisms relying on Immigrants TTs, donations and loans. Oil discovery in the 1980s brought about a new form of international capital through multi-national oil companies.

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