A Hard Look at Yemen’s Reform Program: WILL IT WORK? [Archives:1998/30/Business & Economy]
July 27 1998
Professor of Economics,
Sanaa University.
The Government has dished out a lot of talk on how important is the economic reform program it is implementing. That is actually true. The reform program is very important, and its success is quite vital for the future well-being of the nation.
There is another truth. The Republic of Yemen is far worse off without this reform program than with it. In spite of the major hardships that resulted from implementation of the reforms, our people would have faced far more hardships if there was no program.
There is a third truth. By and large, the main thrust of the reform package is good and useful. These include the efforts to free the economy from bureaucratic muddling; to correct price distortions by making product and factor costs reflect their true market worth; to re-structure the laws to increase accountability, transparency, etc.; to enable the private sector to lead economic activities, through various measures, especially privatization; to remove monopolistic and oligopolistic rights and privileges in trade, labor and capital relations leading to better terms for consumers.
Having said all that, it looks weird that I should still pose my question: “Will Yemen’s reform program work?”
There are two worries behind my question.
1. Sweet Talk and Good on Paper:
The best way to describe the system that we have today is that its representatives or officials sweet-talk everybody. They know what the donors want to hear, and they give it to them.
As a person who sat in a few of the meetings of our senior officials with visitors, I often get bewildered, as I hear the visitors come out saying, “What a great guy!” The phoney show of our senior officials has fooled a lot of people. But now, more and more people are beginning to discover that the system does not deliver on many of the pledges it makes. This is a tricky conclusion, because it is not exactly accurate.
There have been times when the regime delivered, in terms of biting the bullet. Aaah, but that is when the sacrifice has to be borne by people other than the men of the system. Look at the record, and you will find that most of the hardships have been passed on to the general public.
2. System Needs Overhaul:
One of the reasons why the reform program so far looks successful is that the World Bank and IMF have poured in almost a billion dollars since implementation of the reforms started in 1995. Other donors – bilateral and multilateral have also contributed handsomely.
With that kind of unearned inflow of hard currency, any situation can be bailed out. What the donors, especially the IMF and World Bank people should realize is that the day the financial subsidy stops, the economy of Yemen will collapse.
So, what is needed?
The system needs an overhaul. To be able to use the resources now available to Yemen in order to create a sustainable growth condition, it is important that the very system change. Our system is like an old shirt. You can only patch up so many holes. At the end, you need a new shirt.
Most of the key people who manage our affairs today have been at it for the last thirty years. In fact, they are directly responsible for the mess we are in today. These men need to be changed. The structure of our administration needs to be change. Our value system and incentives have to be change.
I worry about the future of my country. Literally, this is a daily worry. I look at two, three, five years down the road, and I worry.
And I feel disgusted with foreign bureaucrats who appease the system while they know something serious is wrong. Biting the bullet and introducing meaningful change in a gradual manner today is far better for Yemen and for regional stability.
There are many signals that change is necessary. But the regime fails to accept, let alone comprehend the need for change. It is here that Yemen’s friends can play a helpful role. Actually, Yemen today needs good advice from its friends, more than it needs their money.
In my opinion, the present reform program and the people managing it will not lead us to the results we want.
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