On the heels of a major attack against Yemen’s defense ministry last Thursday, it is easy to focus on the dire security situation and the connection between the current political stalemate in the National Dialogue with the uptick in violence and attacks on government officials and institutions. Yet just as important is the link between improving economic conditions and hope of success with Yemen’s fragile and teetering political transition. Long neglected, there is increasing recognition that economic issues need to be prioritized and urgent reforms adopted—despite the current dysfunctional government in Sana’a, widespread corruption, and the uptick in sabotage and attacks—in order to maintain momentum for Yemen’s political transition and inject a measure of credibility for the Yemeni government.
Last week, the Atlantic Council hosted a half-day symposium exploring these issues (for more information, see Yemen’s Economic Agenda: Beyond Short-Term Survival) with a high-level group from the World Bank, International Monetary Fund, US State Department, US Agency for International Development, US Treasury Department, the diplomatic community, and representatives from Yemeni civil society and private sector. The clear consensus from the discussion was that if Yemen does not implement a coherent and forward-looking economic policy to address the original demands of the 2011 uprising, especially unemployment and basic service delivery, instability will continue to threaten the nascent transition. And perhaps more important, the discussion highlighted “low-hanging fruit” and specific steps the Yemeni government could take to improve the situation.
The current Yemeni government maintains that it does not have a mandate to implement economic reforms; rather, its sole prerogative is to oversee the transition, preserve the status quo, and prevent disintegration into further violence and instability. But Yemenis across the political spectrum and throughout the country are frustrated and losing patience with the current transition government’s lack of progress on job creation and basic service delivery, and the longer the government waits, the more difficult it will become. The last several years have not been favorable for Yemen’s most vulnerable population—the poverty rate has increased from 42 percent in 2009 to 55 percent in 2013, which underscores the daunting economic challenges and rapid decline in the standard of living for thousands of Yemenis. The emphasis on the National Dialogue and negotiating between competing political factions has consumed both Yemeni and many international stakeholders, which has detracted from a much-needed focus on the underlying catalyst for instability as well as one of the leading drivers of the revolution: the deteriorating economy.
Despite the overwhelming nature of the task, there are a number of low-cost steps (in terms of both financial and political cost) that the government could take in the short term to boost public confidence and begin stimulating economic activity. Political infighting and security concerns have been used as an excuse for inaction, but a great deal could be accomplished with the requisite political will and a coherent vision. The government could be doing far more to enhance transparency and accountability, communicating better and more extensively with the public, and improving the investment and business climate to create more level-playing field that would promote private sector activity.
To begin with, the government should fulfill the commitments that Yemen itself made through the Mutual Accountability Framework (MAF) more than two years ago to increase transparency and accountability. In particular, the budget process should be transparent and open to debate, and a “people’s budget” with a clear, easy-to-understand breakdown of government expenses and revenue should be made public and accessible online. The government should also make good on its commitment to delineate clear criteria for government employees and introduce standards of good governance for the public sector, which has repeatedly promised but not yet done.
At the same time, the government needs to demonstrate to the public that it is serious about addressing corruption—perhaps the most important grievance that led to the 2011 uprising and the area where government inaction has been the most disappointing. President Hadi and the transitional government should more aggressively advance anti-corruption measures and empower the bodies tasked with oversight, namely the Central Organization for Control and Auditing (COCA) and the Supreme National Authority for Combating Corruption (SNACC), whose work has been stalled repeatedly. The perception among many Yemenis is that corruption is actually worsening, not improving; the feeling that “business as usual” continues, benefiting the political, business, and security elite at the expense of the public, undermines the very legitimacy of the transitional government and President Hadi’s credibility.
The government also needs to develop an effective and consistent communication strategy to engage the public on an ongoing basis—not just ad-hoc statements or announcements issuing decrees and presidential declarations. President Hadi, the transitional government, and state institutions have been notorious weak at communicating developments on both the political, and economic front. A clear example of this shortcoming is seen with the National Dialogue; despite support from the international community, the vast majority of Yemenis have little understanding about what the National Dialogue means, who is involved, and what the impact will be on the future of the country. Better communication about what is happening in the National Dialogue is essential to the success of the entire endeavor, particularly as it relates to generating buy-in among the population in the south. This does not just mean radio and television advertisements and billboards, but direct public outreach, town-hall meetings, and other more creative approaches. Such communication is essential for the success of the Dialogue, but engaging in this kind of public outreach would also generate good will among the public towards government efforts to enhance the good governance and transparency agenda.
The government should learn from the experience of the National Dialogue in thinking about its economic reform agenda. In order to begin the two most important reform initiatives that Yemen must implement in the coming years—subsidy reform and civil service reform to eliminate ghost-workers from the rolls—the government needs to introduce an aggressive communication campaign to explain to people what is happening, why, and how it will benefit the poor in the long term. Shifting public expenditures in these ways will be a significant—though necessary—endeavor in order to move to a more fiscally-sound, sustainable budget for Yemen’s future. But without laying the foundation through systematic messaging, both initiatives are certain to confront significant backlash and resistance that could undermine the potential gains. There are many vested interests that benefit both from the current fuel subsidy regime and the inflated public employee rosters that will leverage public sympathy to thwart reform efforts. Unless the government pro-actively undercuts these efforts by building constituencies of support for reforms that will enhance cash transfers and social safety nets to benefit the neediest populations, it will have little chance of success.
The final arena where the government could take concrete steps even in the current circumstances is to start improving the business-operating environment and minimizing the constraints on the private sector. Some of this might require legislative action, such as passage of the Public-Private Partnership Law or developing a bankruptcy law, but other actions could be taken to streamline the process of registering new businesses and cutting red tape that do not depend on parliament. In other cases, decent laws exist on the books, but are not currently being implemented effectively or universally. At this point, most political leaders and officials recognize that high-value job creation can only be provided by the private sector, thus the government should take action to simplify the procedures to open and close businesses, ease regulations to hire and fire employees, even the playing field to access markets of neighboring countries, and address other impediments to growth.
To be sure, the network of elite families and vested interests make the adoption of far-reaching economic reforms extremely difficult, and since the transitional government is divided between the major political factions, even some of the easier steps face obstacles due to a lack of a coherent vision within the cabinet. Yet the international community can play a positive role by incentivizing (and prioritizing) economic reform through political and financial support for President Hadi and the government to implement steps such as those outlined here. None of Yemen’s leaders will take steps deemed as political suicide, but the United States, the United Nations, and other international donors should think creatively about how best to elevate economic issues on the agenda and encourage economic policy-making that will ultimately be in Yemen’s long-term interest.
Danya Greenfield is the acting director of the Rafik Hariri Center for the Middle East. Stefanie A. Hausheer is an assistant director with the Rafik Hariri Center for the Middle East.
Image: Yemeni President Abed Rabbo Mansour Hadi, center, listens to military commanders at the Defense Ministry complex after an explosion at the complex in Sanaa, Yemen, Thursday, Dec. 5, 2013. (Photo: Yemeni Ministry of Defense)