Business

Yemen unrest threatens economic, humanitarian ruin

By Taieb Mahjoub

DUBAI, Yemen, already the most impoverished state in the Arab world, is running the risk of economic and humanitarian disaster if its political and security crisis is prolonged, analysts warn.

“The economic situation in Yemen is already catastrophic: poverty has increased, unemployment has doubled, services have deteriorated and prices of consumer goods have tripled since the beginning of the year,” Mohammed Afandi, director of the Yemeni Center for Strategic Studies, told AFP.

According to Afandi, about 60% of Yemen’s 24 million people are now living below the poverty line on an income of less than $1 a day. Inflation has shot up to more than 35 percent.

“If the crisis persists, there will be economic collapse. There will be famine, particularly in rural areas, and this will lead to a humanitarian catastrophe,” said Afandi.

Shortages of petroleum products and cooking gas have already raised their prices 200 and 300 percent above the official rates, respectively.

Nationwide, electricity and water supplies are frequently interrupted, further adding to the hardships of everyday life.

Oil output, which stood at 300,000 barrels per day in 2010 and generated 60 percent of state revenues, has largely been disrupted by the deadly protests since January calling for President Ali Abdullah Saleh’s ouster.

A Yemeni official, however, speaking on condition of anonymity, said oil production and exports have already returned to normal levels, although he acknowledged that economic recovery depended on a speedy political settlement.

“We are hoping for a political settlement to save the economic situation,” he said.

Saleh however, in power for 33 years and currently recovering in Saudi Arabia after having been wounded in an bomb attack in June, seems reluctant to make any political concessions.

The economic situation, analysts say, is deteriorating fast.

According to Anwar Eshki, director of the Saudi-based Middle East Institute for Strategic Studies, economic growth in Yemen fell to 3% in the first quarter of 2011 and 1.5% in August, down from 4.5 percent in 2010.

The political crisis has discouraged foreign investors and local entrepreneurs from starting up new businesses.

Only 17 new firms have been established in Yemen in the first quarter of this year, compared to 92 start-up companies during the same period of last year, Eshki added.

Local manufacturers are also struggling. According to Eshki, at least 500 factories have been forced to shut down since the start of the year.

The private sector has lost an estimated $17 billion dollars so far this year, said Eshki, pointing out that the construction sector has seen a decline of between 80 and 90 percent while the tourism industry is almost paralysed.

The decline in living standards, a weak central government, a tribal culture and the presence of an active Al-Qaeda branch in Yemen “could lead to civil war with unpredictable consequences on the entire Gulf region,” Eshki said.

But regional and international mediation efforts have so far saved the country from imploding.

“The situation remains under control … but time is short and it is the responsibility of the international community to provide urgent humanitarian aid to ensure the worst case scenario is not realized,” Eshki said. The UN Security Council has already sounded the alarm. In August, the council expressed “serious concerns” about the deterioration of the humanitarian and economic situation, following a mission to Yemen of UN special envoy Jamal Benomar.