When the two Yemeni states merged into one formation in 1990, they not only had two different economic systems; they were also economically two different sizes. The Republic of Yemen (also called Northern Yemen) had a Western-oriented economic system, while the People’s Republic of Yemen (South Yemen) had a state-controlled system. Northern Yemen’s population was just over three times greater than South Yemen’s, with the larger GNP – as well as a higher average income. After the merger, a mixed economy was established with a partially privatized and partly state-controlled business sector. The economic development of the new state formation was hampered by several dramatic conditions, both internally and externally: The development plans were strongly influenced by the Gulf crisis and the war in 1990-91. implied UN sanctions against Iraq, which Yemen joined. As Iraq was one of the country’s most important trading partners and aid providers, Yemen lost significant revenue. The return of nearly 1 million Yemeni guest workers from Saudi Arabia and other Gulf states also resulted in major losses in the form of currency these normally sent home. The events led to an economic crisis, with the loss of around 50% of the state’s expected revenues and rising unemployment, estimated at 25-30%. In 1994, the economic development was severely affected by civil war, which not least led to major devastation in former South Yemen, including the port city of Aden. According to countryaah, the government estimated the destruction to a value of approx. $ 4 billion. The terrorist attacks against the United States in the fall of 2001 also affected Yemen’s economy to some extent. through declining tourist visits and revenue. Relations with Saudi Arabia were normalized in 2000–01.
A triggering cause of the merger between the two Yemeni states was the discovery of viable oil deposits in both countries in the mid-1980s, and the desire to coordinate operations for the best use. North Yemen already produced approx. 180,000 barrels per day. The significant oil deposits, despite the fact that Yemen is mostly an agricultural country, and the majority of the population is still employed in a comprehensive agriculture, with the narcotic plant khat occupying a dominant position. Industry and transport have experienced a significant upswing as a result of the oil business. Aden, which is defined as the country’s economic capital, has been given the status of economic free zone in the hope of attracting foreign investors.
Agriculture and fishing
The majority of Yemen is unsuitable for agriculture, with only 6% of land being cultivated, but approx. 30% is suitable for grazing land. Agriculture is still the most important industry in terms of employment, with just over half of the working population. In large parts of the country agriculture is extensively and with low yield. The best agricultural areas, which are the most fertile areas of the Arabian Peninsula, are found in the more precipitous areas of the west/northwest, as well as in some river valleys and irrigated areas. In the highlands, agriculture is often run in terraced form to better utilize irrigation. The low rainfall and the frequent periods of drought mean that Yemen has a significant water problem. Large topographic variations, from tropical areas to arid plains, allow for wide production. Main selling products are coffee, cotton, fruit, hides and skins. In addition, wheat, sorghum, maize, tobacco, dates, fruits, vegetables, etc. Coffee production has long been in decline, partly due to fluctuations in the world market, and partly because it is more profitable to produce the narcotic product khat. Khat, which is of no nutritional value, is chewed, and is a widespread habit in Yemen and some other countries in the region, to which Yemen exports khat. The cultivation of khat is considered a negative factor for the country’s development, as the product, which alone accounts for up to 25% of GDP and is the country’s second largest employer, occupies large areas and significant quantities of water – which could otherwise have been used for the production of other crops. However, cultivation of khat is the most important source of income in the countryside. In particular, goats and sheep are kept as well as camels.
Alongside petroleum extraction, fisheries are considered to be the area where Yemen has the greatest growth potential; The fishing fields especially in the Gulf of Aden and the Arabian Sea are considered very rich, but the deposits are also good in the Red Sea. The industry is currently underdeveloped and most of the catches are taken in coastal areas and by fishermen with small boats and simple fishing gear.
Yemen has few proven mineral deposits besides petroleum, which were found in viable quantities in the Marib/al-Jawf region (formerly northern Yemen) in 1984, and in the neighboring Shabwe region (formerly southern Yemen) the following year. Production began in northern Yemen in 1985, in southern Yemen in 1987, after which a joint company to manage the extraction in the adjacent fields was established in 1989. In 1990, total recovery was approx. 180,000 barrels per day, of which 170,000 barrels were produced in northern Yemen. In 1987, a 440 km long pipeline from Marib to the export terminal at Ras Isa on the Red Sea coast, with a capacity of 225,000 barrels per day, was opened; the 200 km long Bir Ali pipeline from the Shabwe field opened in 1991, with a capacity of 100,000 barrels per day. Later, several new discoveries were made, and as of 2004 it was assumed that the country had reserves of approx. 4 billion barrels. Day production in the early 2000s was approx. 450 000 barrels. The Norwegian oil company DNO became an operator in the Sayun-Masila basin in 1998. Significant gas reserves have also been identified, partly related to the oil deposits and partly isolated; as of 2003, gas deposits were estimated at approx. 16.9 trillion cubic feet. Plans were in place for both gas export and local utilization for electricity production.
Large quantities of salt and gypsum are extracted. limestone, marble, granite and basalt; Yemen also has deposits of iron ore, coal, copper, nickel, lead, zinc, gold, silver, uranium, sulfur and molybdenum.
Electric energy is produced almost exclusively in thermal power plants, which in 2015 had an installed capacity of 1.5 GW. Production was around 5 TWh, of which 99 percent was based on fossil energy use.
Yemen has had a little developed industry, which is, however, somewhat developed parallel to the establishment of the country’s oil business. In 2000, the sector (excluding petroleum) accounted for 4.9% of GNI; a decline compared to the past, mainly due to the increased importance of the oil sector. The most important are the production of food, including fish canned goods, chemicals and petroleum products, building materials (cement, iron and steel), textiles and leather goods. The first oil refinery was completed in Aden in 1954, with a capacity of up to 170,000 barrels per day; The Marib refinery in the north has a capacity of 10,000 barrels per day. A new refinery at Ras Issa near Hudeida was started in 2005. Central to Yemen’s industrial sector development strategy is a free trade area in Aden.
Yemen traditionally has a large deficit in the trade balance with foreign countries, and even with significant oil revenues, the country has been dependent on other sources of income, substantial foreign aid and money transfers from Yemenis working abroad. At the beginning of the 2000s, oil exports accounted for over 70% of total export value as well as government revenues. Otherwise, coffee, animals, hides and skins are exported on a smaller scale. The main import goods are food products (especially cereals and cereal products), fuels, iron and steel, machinery, means of transport and equipment and various consumables. Key trading partners are Saudi Arabia and the United Arab Emirates (import) and China, Korea and Thailand (export).
Transport and Communications
The transport network in Yemen is underdeveloped, but after the merger of the two states in 1990, work on upgrading has intensified, with priority being linked to the former separate states, as well as improving the road connection to Oman. There were per 2000 approx. 70,000 km of roads, of which around 12% were paved. The main port is Aden at the Gulf of Aden and al-Hudaydah, which is the main port of the Red Sea. Aden has long been one of the most important gardens in the region, and one wants to modernize and redevelop it to a more central position. Otherwise, there are a number of smaller ports, and their development is downgraded in light of the commitment to Aden. International airports in San’a, Aden, al-Hudaydah, al-Mukalla, and Ta’izz; Yemen has 12 domestic domestic airports and a number of airstrips.