Yemen: Never mind Anwar al-Awlaki, the economy is a bigger threat

The Times Square bombing was a reminder of the potential cleric Anwar al-Awlaki and others in Yemen have to inspire terrorist attacks. But academics and financial analysts who have spent time in the country lately say that a faltering economy, not militants, poses a greater threat to Yemen's stability.

Steadily rising prices in what was already the Arab world’s poorest country is fomenting discontent and disrupting the patronage networks that have kept the state intact, they say. The central government faces a growing secession movement in the south, restless Houthis in the north, and a regional Al Qaeda branch that claimed responsibility for the failed Christmas Day bombing in Detroit.

“None of these issues are going to be the ones that overwhelm or destroy Yemen; it’s the economy,” says Christopher Boucek of the Carnegie Middle East program in Washington. “If you look at the way the Yemeni government has ruled, it’s been through the politics of personal relationships, through corruption, through patronage... As the amount of money that the central government has slowly gets to be smaller and smaller the government will have less ability to maintain control.”

Anger at the government from citizens is palpable. “The biggest problem in Yemen is the government – they are thieves,” spits Maher, a law student who drives a taxi on the side. He has seen discontented neighbors turn to radicalism. “People are joining Al Qaeda because the government isn’t doing anything for them, so they join easily.”

Government revenue fell 75 percent

Yemen relies on oil revenues, which account for 80 percent of the state’s budget, to stay afloat. Oil money has allowed the government to subsidize basic goods, pay public sector salaries, and ensure cooperation in remote tribal areas – including ones where Al Qaeda in the Arabian Peninsula (AQAP) is believed to operate. But the country’s oil reserves are projected to run out by 2017.

To make matters worse, Yemen fell into a financial crisis about 18 months ago. In the first quarter of 2009, the government’s revenue fell by 75 percent over the previous year, said Ginny Hill, on a research trip here for the London-based think tank Chatham House.

“It was at that point that the government began to realize that there might be something at stake here that needed to be addressed,” she said, adding that the full scope of the crisis has since become clearer.

Effects of 10-point plan not trickling down yet

In August, President Ali Abdullah Saleh – whom the US is leaning on to rein in AQAP militants – approved a 10-point plan to reverse the country’s downward spiral. President Obama lauded the plan for what it would do to fight corruption, improve the rule of law, and create economic opportunities.

The plan, which has been criticized by some as superficial and populist, was to be phased in over two years. But nine months on – and two-foiled terrorist plots later – its effects have yet to be felt by people like Umm Ali al-Bahri.

She has been waiting since 6 a.m. for a canister of cooking gas; now, it’s almost noon. As the temperature in Yemen’s capital climbs into the 90s, the older woman squats on a curb in the scant shade across from the delivery point, along with dozens of others. “They said it’s going to come, but we are still waiting,” she laments, “it’s like this every week and prices keep going up.”

It’s no better for merchants such as Saleh Abdullah, who has worked in a fruit stall here for 25 years. “Business is not good these days, the prices are very expensive for everything,” he says. “I don’t know why, the local things and imported things are very expensive.”

The Yemeni rial has lost more than 10 percent of its value against the dollar this year.

Cautiously, government weans Yemenis off subsidies

The international community has put increasing pressure on the Yemeni government to solve the economic crisis by reducing domestic energy subsidies – a measure already in the 10-point plan. Subsidies consume almost a third of the budget and encourage overuse and smuggling.

In early May, the government raised the price of gasoline and kerosene for the second time this year.

Jalal Yaqoub, deputy minister of finance, told the Monitor the government would continue to decrease subsidies gradually every three months to avoid social unrest. In 2005, riots erupted when the government announced it would slash subsidies, leaving at least 35 people dead.

Another point in the plan is to hire 100 new Yemeni government officials and place them in key positions in ministries to streamline government operations and disperse internationally pledged aid money, only a tiny fraction of which has been used.

“Our most important plan, our secret weapon: to bring in good people into the government,” says Mr. Yaquob, the plan’s architect. But the government is still only in the headhunting phase for those positions.

“Does the government really have a plan?” asks a senior official working in economic development in Yemen who did not want to be named for fear of backlash. “It’s focusing on 10 elements, which focus on quick gains ... It’s not very well thought through. It’s presented in a very populist way, in order to make quick wins.”

Perhaps those quick wins, he added, can build public confidence in the government.

'We are fighting life'

Yemen’s population of 23 million is set to double in the next 20 years and unemployment stands at 35 percent. Every year roughly 250,000 new university graduates flood the job market, with few landing a position.

So many young people find themselves in the position of Mohammad Abdul Magid, a teenager sitting on a plastic chair in front of a poultry shop. One of twelve children, he and his five brothers support their family by selling qat, a legal mild narcotic consumed in Yemen. “The money just isn’t enough,” he says, “We can’t afford meat. On Fridays, we buy one chicken for the whole family.”

Throughout the country, “the Yemeni government’s authority and legitimacy in power will continue to recede as finances recede,” says Dr. Boucek of Carnegie. “It’s the ... chaos of absence of state authority or state legitimacy, that breeds the kind of problems that we are going to need to focus on in the future.”

But in the Sanaa market, Mr. Abdullah the fruit seller isn’t thinking about networks of patronage or a breakdown of authority; his main concern is just living through turbulent economic times. “We are fighting life, trying to do our best. You know how Yemenis do,” he grimaces before turning back to his stall.