- The Washington Times - Tuesday, August 24, 2004

SAN’A, Yemen — Despite government successes in the war on terror, many say Yemen still must reduce its grinding poverty and revive the economy or it will remain one of the region’s most fertile recruiting grounds for al Qaeda and other radical Islamist groups.

Renewed fighting this week in northern Yemen with followers of radical Muslim cleric Hussein Badr Eddin al-Houti provided a grim reminder of the country’s challenges, despite the capture of hundreds of terror suspects and key al Qaeda operatives in the past three years.

The government has started to clamp down on religious schools where radical Islam is thought to be taught, but critics worry that more fundamental problems are not being addressed.

Abdullah al-Faqih, a professor of political science at San’a University, said if the government does not act soon to reform the economy, “Yemen will undergo periods of instability, conflict and lawlessness.”

“It will be a breeding ground for extremism and terrorism. It will serve as a destabilizing force in the region,” he said.

Underscoring the Bush administration’s concern about cultivating Yemeni cooperation in the global terrorism war, a U.S. military delegation arrived in Yemen this week for talks on security and military cooperation and combating terror, Agence France-Presse reported, citing local official sources and the U.S. Embassy.

The delegation is being headed by Brig. Gen. Samuel Helland, commander of the joint forces in the Horn of Africa.

The official weekly September 26 reported that the delegation will meet Yemeni officials in the ministries of interior and defense for security and military talks.

Anti-U.S. sentiment is high in Yemen, as in many countries in the region, because of the presence of U.S. troops in Iraq and the Israeli-Palestinian conflict.

Economic conditions in Yemen have gone from bad to worse in recent years. Economic growth is not keeping up with the rise in population. The population growth rate is estimated to be as high as 3.6 percent annually, while the economic growth rate fell below 3.6 percent last year and might not exceed 3.3 percent in 2004.

Forty-two percent of the Yemenis live in poverty, and it is estimated that as many as 40 percent of the Yemenis are out of work. Earlier this year, the Arab League reported that Yemen remains the poorest country in the Middle East, with average income per capita at $508 a year.

The government has plans to reform the economy, based on a poverty-reduction blueprint put together in 2002. But progress has been slow.

“The government of Yemen has not acted on the reform measures recommended by the World Bank in the last year-and-a-half to two years,” said Robert Hindle, the global bank’s country manager for Yemen.

“We are recommending that the government come back on the reform path across the board. It’s the only way to be able to improve the lives of people in Yemen,” he said.

Government officials argue that part of the reluctance in pushing through painful economic reforms has been that it is focused on national security and the war on terror.

“First, we have to sustain our security level, because there is no development or peace without security,” said Minister of Planning and International Cooperation Ahmed Sofan, who also serves as deputy prime minister. “If we measure priorities on action plans of the government, security comes first.”

Others argue that those profiting from the current system are resisting change.

“Political groups and influential people try to satisfy their vested interests,” said Ali Abdul Rahman al-Bahr, former oil minister and chairman of the Housing Credit Bank in Yemen. “They are trying to impose their own interests and are putting down their own conditions before anything happens.”

Yahya al-Mutawakel, an adviser in the Planning Ministry, cited reducing subsidies on diesel fuel as an example of the difficulty of reform in the face of special interests.

Up to $600 million a year in subsidies have kept the price of diesel fuel 75 percent lower than costs in neighboring countries. If the money were redirected to more useful purposes, those profiting from smuggling fuel across the borders would be hurt.

“Lifting the subsidies on diesel fuel is a major element for reform because it has been a misuse of funds,” Mr. al-Mutawakel said. “The reaction against price increases is not just among the people. It is also those with vested interests who will get hurt when subsidies are reduced.”

The World Bank argues that strong oil revenues coming from high world prices should embolden the government to implement key reform, but others say that the soaring oil royalties have given the government more time to evaluate the situation before taking action.

“World oil prices and oil revenue in Yemen have been favorable,” Mr. al-Mutawakel said. “This could be used in two ways: Speed up economic reform or use more time to take steps more wisely.”

Currently, Yemen produces about 450,000 barrels of oil a day. More than 30 percent of Yemen’s gross domestic product depends on oil, and 85 percent of the government’s budget comes from oil royalties.

But the good times will not last long: Oil revenue has stabilized in the past few years, and according to the World Bank, oil reserves are now drying up and revenue is dropping considerably this year.

Mr. Hindle said as oil royalties continue to decline, the government’s ability to prop up the economy will be called increasingly into question, perhaps leading to a major downturn.

Another concern is that a partial overhaul of the economy would not be enough. The reform blueprint calls for an increasing role for Yemen’s private sector, leading in turn to more local and foreign investment to boost economic growth and generate more jobs.

But the government has made little progress in reforming the judicial system, considered critical to attracting new investment dollars and reassuring foreign investors.

“It’s hard to picture people investing in Yemen when there is no legal protection for doing business here,” said one Yemeni businessman. “The first thing that needs to be done is to create a real judicial system and laws that are enforced.”

Many here think the longer the delay, the more recruits that the terrorists will find.

“Poverty breeds terrorism,” Mr. Hindle said. “It’s important for the Yemeni government to tackle the poverty issue to help prevent the emergence of extremism. If the government acts now, it will be able to improve the lives of the Yemeni people. But the longer it waits, the more difficult it will become.”

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