South Yemen: Gateway to the World?

Karen Dabrowska is a journalist and writer focused on the Middle East
South Yemen could be the Hong Kong of the Middle East. Centred on the strategic port of Aden located on the southern tip of Arabia there is tremendous potential for the development of a free trade zone or a special economic zone, a container terminal with huge capacity for transit containers, a transport hub and a thriving fishing industry. There is also great potential for the development of the tourist industry centred on unique mud brick architecture and the island of Socotra, an ecotourist’s dream come true. But after independence from British colonisation in 1967 instead of transforming itself into a gateway of the world South Yemen has become a living hell for its people.
In the introduction to his book South Yemen: Gateway to the World?, Dr Abdul Galil Shaif says: “Sadly the country’s leaders, both in the days of the People’s Democratic Republic of Yemen (PDRY) and today, have not taken advantage of God-given natural resources which were never utilised or developed for the advantage of the people of the south. Internal politics and feuds rather than the exploitation of economic opportunities dominated the agenda of the National Liberation Front (NLF) and the Yemeni Socialist Party which ruled South Yemen from 1967 to 1990. When the south united with the north its resources were exploited for the benefit of the northern elite rather than the benefit of the people of Yemen.”
When the thirty-three year rule of autocratic President Ali Abdullah Saleh was brought to an end by the Arab Spring in 2011 his deputy, Abdrabbuh Mansour Hadi, assumed power and formed a unity government. Hadi has struggled to tackle widespread poverty and malnutrition, an Islamist insurgency led by al-Qaeda, a secessionist movement in the south, and Zaidi Shia rebels in the north. A National Dialogue Conference involving rival political, tribal, religious and social groups was unable to reach a consensus or draft a constitution and in 2014 the Houthis took over the north of the country.
After the coup, the internationally recognised government (IRG) fled to the south and a war in which Iran backed the Houthis and Saudi Arabia and the UAE backed the IRG led to the world’s worst humanitarian crisis: more than 18 million people – half the population – need humanitarian aid to survive, and 17 million people are food insecure.
A UN brokered ceasefire in 2022 eased tensions but peace efforts have been hampered since the Israel-Hamas war broke out in October last year and the Houthis started attacking ships in the Red Sea with devastating effect. According to a report from the Defence Intelligence Agency the Houthi campaign has led to a 90% decline in shipping activity through the Red Sea and shows little signs of recovering even though two US aircraft carriers are now deployed in the region.
The past ten years have clearly illustrated that the liberal-minded southerners with a socialist/community background will never be able to live together in one state with a fundamentalist regime, akin to the Taliban, in the north.
The south has a well organised pro-independence movement, the Southern Transitional Council, which is paving the way for another southern state and, if support from the international community is not forthcoming, a unilateral declaration of independence may be the only solution.
Yemen’s economy is in a dire state. In 2010, Yemen’s GDP was around $40 billion. It’s current GDP has dropped to $18 billion, representing more than a 50% contraction. This steep decline can be attributed primarily to ongoing conflict, political instability, and infrastructure damage. Additionally, restrictions on trade and limited foreign investment have worsened the economic outlook, further shrinking GDP.
In the area of Yemen not under Houthi control the IRG has made several critical mistakes that have worsened the economic crisis. The most visible sign of this is the catastrophic decline of Yemen’s currency. Over the past few years the currency plummeted to unprecedented lows, severely eroding the purchasing power of ordinary citizens.
The government resorted to overprinting money during the reign of Abdrabbuh Mansour Hadi to cover its fiscal needs, particularly to pay salaries. This excessive printing of the rial has flooded the market with currency, driving inflation sky high.
The Central Bank in Aden has failed to function as an independent institution, instead becoming a tool of political manipulation. This has led to poor decisions by consecutive leaders of the Central Bank, worsening the currency crisis and allowing inflation to spiral out of control.
Management of foreign reserves has been negligent. There is little to no accountability for how foreign aid is used and mismanagement has depleted these reserves, which could have been used to stabilise the exchange rate.
The government has not been able to sell oil and gas in the southern regions because of Houthi threats to use military means to target the ports. As a result, the price of everyday goods – bread, fuel, medicines – has skyrocketed. The people are suffering, unable to afford basic necessities, while businesses are closing down because they cannot keep up with the rising costs and foreign currency repatriated outside the country.
Dr Abdul Galil Shaif believes a Southern Yemeni state could provide a real alternative – an opportunity to rebuild and manage the economy much more effectively through:
•Localised Economic Control: a southern state, free from the complexities of the broader conflict in northern Yemen, would have the ability to focus solely on stabilising its local economy. By building strong, independent financial institutions a system that is resilient and capable of serving the needs of the people could be created.
•Harnessing Natural Resources: the south is home to vital oil and gas resources, particularly in Hadhramaut. A Southern Yemeni state could develop these resources to generate much needed revenue, reinvest in infrastructure, and create jobs.
• Developing Strategic Port Cities: southern cities, like Aden and Mukalla, are strategically positioned along international trade routes. With proper management, these ports could become economic hubs, attracting investment and generating revenue through trade.
•Banking Reform: priority would need to be given to rebuilding a robust banking system. A southern government could work to make the Central Bank truly independent, ensuring it can regulate the currency and manage monetary policy effectively. Exchange bureaus could be regulated and financial activity brought back under formal control eliminating the rampant currency speculation that has damaged the economy.
•Anti Corruption Measures: success is impossible without tackling corruption. A Southern Yemeni state would have to ensure transparency in government spending, rebuild public trust, and attract international aid and investment by proving that funds would be used appropriately. Yemeni business people residing in the Gulf and the Gulf states themselves could turn South Yemen into a thriving economy.
“While the IRG has made serious mistakes in handling the economy of the liberated areas – allowing the currency to collapse, inflation to soar, and the banking system to break down – a Southern Yemeni state could offer a way out of this crisis” Shaif says. “By building a competent and transparent government that focuses on economic stability, we can stop the suffering and rebuild a prosperous future for our people. It’s time to take control of our own destiny, implement real reforms and turn South Yemen into a thriving economy and an economic gateway to the world.” (South Yemen: Gateway to the World? by Abdul Galil Shaif, Author House, 2022)
The opinions expressed are those of the contributor, not of the RSAA.

South Yemen: Gateway to the World?
Abdul Galil Shaif’s book tells the story of South Yemen tracing the history of the country from the struggle for independence from the British to the establishment of the Peoples Democratic Republic of Yemen. It considers the countries achievements – the emancipation of women, redistribution of land to the people, an impressive mass literacy programme – and its demise due to internecine struggles in the Yemeni Socialist Party. Until the Houthi coup in 2014 southerners were second class citizens in a state which exploited their resources and marginalised their people and another struggle for independence is now being waged against the fundamentalist Houthi regime.