This is the final installment in our series about Yemen's economic crisis. Read the previous pieces on the war economy, the currency crisis, and Yemen's pre-war economy.

It might seem premature to discuss reconstruction as the war in Yemen drags on, with many actors on the ground seeing no end in sight. However, several key decision-makers, including Saudi Arabia and the Gulf Cooperation Council, are already discussing post-war strategies for reconstruction and recovery in Yemen. It is valuable then to discuss some policies that could facilitate rebuilding Yemen’s fractured economy, with an eye toward the future and the cessation of hostilities, but including those that could help the economy even before the conflict has ended.

As already described in the first blogpost in this series, the economy has been weak since Yemen’s unification in 1990, characterized by the patronage networks of President Saleh, an oil-dependent economy, a rural-urban divide, remittances, and high rates of unemployment. Reconstruction should therefore not be seen as an effort to rebuild what already existed, but rather an effort to "build back better”: to build up a nation that is more equitable, a government that is less corrupt, and an economy that promises stability, health, employment, and wellness for the civilian population.  These strategies for reconstruction may have to rely on the examples of other recovery efforts of nations experiencing civil war, while keeping in the forefront of policy the specificities of the local context and culture. The following points outline some of the key priorities for the reconstruction effort, why they are important, and what they could mean for the future of Yemen.

Livelihood Strengthening

While humanitarian aid is an invaluable life-saving tool, it is a temporary fix for a situation that calls for longer-term solutions. Livelihood strengthening, on the other hand, frames reconstruction as a longer term effort to find a way to give people a steady income. Livelihood strengthening programs would prioritize job creation and the payment of people’s salaries, reviving people’s sense of purpose and ability to contribute to their country’s and family’s survival. Reconstruction programs, therefore, should emphasize job creation, with new opportunities in sectors such as infrastructure, private companies, and public services. Infrastructure in particular would be a sector that could support job creation, with roads, hospitals, airports, and ports in need of repair after years of damage and neglect.

Public Services

The revival of the delivery of public services would contribute a sense of normalcy to post-war Yemen. While hospitals, schools, water systems, and electricity systems have been operating  in some governorates throughout the war, thanks to local governments in places such as Marib, public services as a whole have declined throughout the country. Providing these essential services, as well as providing electricity to rural areas where access to electricity has never existed[1], would strengthen the credibility of the state in the eyes of the people, as well as provide more public sector jobs. Municipalities in particular might be best suited for the provision of basic services, as these groups work closest to the beneficiaries (“Short Term Recommendations”). This could also be an opportunity for electricity to be supplied using alternative energy (such as solar energy), offering a more sustainable future for Yemen.

Central Bank

Because of the forced relocation of the Central Bank from San’a to Aden, Yemen lacks a single, de-politicized entity to represent the country in the international financial system. Competing versions of segments of the Central Bank exist in San’a, Aden, Marib, and Hadhramawt, representing a complete fragmentation of the country’s financial infrastructure (Taraboulsi-McCarthy). A key part of reconstruction will involve establishing a central bank that can stabilize the currency, represent Yemen on the international stage, offer credit to small businesses and importers, and start to pay public sector salaries.

Export of Oil and Gas

In early August it was reported that Yemen had been able to export its first shipment of crude oil since the war began. Since the beginning of the conflict, the export of energy products, which once accounted for about 25% of GDP and 65% of government revenue, has been largely suspended. If production of oil and gas can continue consistently, exporting would provide much-needed revenue to the central government, as well as help to replenish the foreign currency reserves, increasing the value of the Yemeni riyal.

The Role of the Private Sector

While the restoration of the central bank, infrastructure, and the provision of public services involve state interventions, the government and international organizations make up only one piece of the reconstruction process. The private sector will also likely play an important role. Since the conflict began, the private sector has stepped up to address the crisis, stopping the dire situation from “being unfathomingly worse” (Azaki). This will likely continue into reconstruction as the private sector will become an important source of employment. As Ali Azaki has argued, the coordination of international aid organizations and the private sector is crucial to the success of humanitarian efforts.

The private sector will also play an important role in shifting businesses away from the war economy. By offering other sources of employment and profit, the private sector can encourage members of groups that are currently profiting from the conflict to contribute to legal business ventures.

Think local

Political and economic power in Yemen has been decentralized and governorates have become used to a certain degree of autonomy since the conflict began, leading activist Baraa Shiban to encourage reconstruction actors to “think local”--down to municipalities and local governments. Reconstruction of the economy will involve engaging with local communities from the ground up, building off of the survival mechanisms they already have put in place since the war began. The Yemeni diaspora will be a crucial community to engage in these efforts.

Emphasizing local autonomy on a governorate level might also encourage Marib and Hadhramawt, as well as the increasingly-powerful Southern Transitional Council in Aden, to come on board and commit to a lasting peace agreement, knowing that they will not have to cede too much provincial autonomy to a newly-created centralized government.

The role of Saudi Arabia & the UAE

There is a tacit assumption on the part of international organizations and the US and UK governments that the coalition will work to reconstruct Yemen following the conflict. In reality, although Saudi Arabia has pledged almost 8 billion dollars, the degree to which Saudi aid has helped the humanitarian situation thus far remains largely vague, which does not bode well for Saudi Arabia’s commitment to future reconstruction efforts ("Yemen's economic future"). Because of this lack of transparency, the US, UK, and UN should not rely solely on Saudi Arabia and the UAE. With coalition countries as the sole primary donors, regions favorable to the coalition would likely be the recipient of a more concerted effort to rebuild, and individuals aligned with the Saudi Arabia and the UAE would be more likely to receive aid.

One important way in which Saudi Arabia and the UAE can contribute to reconstruction is in terms of their policy toward Yemenis inside their borders. Remittances coming from Yemenis working in the rest of the gulf and in other countries with high numbers of Yemeni workers, such as Egypt, have historically contributed to the funds coming into Yemeni communities. Saudi Arabia and the UAE can offer Yemenis employment opportunities inside their borders and help to facilitate money transfers to the workers’ families left behind in Yemen.

The US government needs to craft a reconstruction plan that focuses on the priorities outlined above, and use its influence with Saudi Arabia-led coalition and other actors to encourage reconstruction efforts that are fair and equitable for the revitalization of the Yemeni economy as a whole. NGOs like the Yemen Peace Project--as well as the American people--have an important role to play in urging the US government to address these crucial questions now, even before a peace deal is reached.

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[1] Only 33% of rural areas had access to electricity as of 2013. 

Sources:

“Addressing Yemen’s Most Critical Challenges: Practical Short-Term Recommendations” Rethinking Yemen’s Economy Initiative, June 2017. http://sanaacenter.org/publications/main-publications/4438 

Azaki, Ali. “International Aid Organizations and the Private Sector: The Need to Improve Coordination to Humanitarian Crisis Response” Rethinking Yemen’s Economy Initiative, March 2018. http://sanaacenter.org/publications/main-publications/5528 

Economy of Yemen. CIA World Factbook, 2018. https://www.cia.gov/library/publications/the-world-factbook/geos/ym.html

El Taraboulsi-McCarthy, Sherine, “Counter-terrorism, de-risking and the humanitarian response in Yemen: a call for action” Humanitarian Policy Group Working Paper, February 2018. https://www.odi.org/publications/11020-counter-terrorism-de-risking-and-humanitarian-response-yemen-call-action

Hamid, Khaled. “An Institutional Framework for Post-Conflict Reconstruction,” Rethinking Yemen’s Economy Initiative, May 2018. http://sanaacenter.org/publications/main-publications/5932

“Yemen’s economic future: from Survival to Reconstruction” Overseas Development Institute, panel discussion. 8 February 2018. Watch livestream here.

Two separate interviews with Yemeni experts with positions in international organizations, who have chosen to remain anonymous.