Did development make use of economic reforms?Economic reforms: a time bomb [Archives:2005/862/Front Page]

July 25 2005

Yasser Mohammed Al-Mayyasi
Are economic reform a Booby trapped grenade?

During the past few days the people streamed into streets, in protest against the raise of oil derivatives. Most of these have only one aim, that is, abolition of these increases, which will negatively affect their livelihood.

The People have no confidence in the economic reforms. They think the price hike is a futile corrupted action on the part of the Government. The past economic reforms had no impact so far .The corrupt continued blundering and looting unchecked .The promises to hold them accountable were not carried out, a thing that encouraged them to further spread their anarchy.

Whatever the people's demands are, they should express them peacefully, without destruction and chaos? Some people and officials are liable to blame for all that happened.

The people were not aware of the benefits of reforms, and they didn't see any outcome from the previous ones. However, they should be aware of the fact that, destroying the streets has nothing to do with the increase in prices.

The government should bear responsibility for failing throughout the past phases to put an end to the plunderers and the corrupt officials.

The official media is also to blame for distorting the Government's image and creating hostility. Most of the media antagonized the people when they should befriend them. In spite of the great resources they possess, media outlets failed to prepare the people for the increases. They should have made the citizen a real partner in the economic concerns.

Most of the people don't even know what economic and price reforms really mean. What they listen to in the media is the government-told story about its successes and news about oil discoveries expected to make the people prosperous. The official media often distorts the president's and the government's image. It also tarnishes Yemen's image abroad. The Yemeni individual listens to the news of his country from foreign media. The official media hides the real problems from the people. This will certainly lead to a state of mistrust among their public .It is natural that the public shuns what the formal media says.

Let us tell what triggered this public rage and spread chaos. One would describe the phases of reforms, and try to find out why the public didn't understand them? Were they successful?

Most of the countries suffer from economic hardships, even the major powers. The problem is growing in the developing countries and especially in the middle east, which we are a part of , because the economic concern is controlled by a number of factors. Among these are the increase in population and lack of resources. The population of Yemen are 20 millions, 42% of whom are below the poverty line. Unemployment is 40%. Illiteracy is 50%, according to the World Bank reports. These are fearful facts showing the roots of our economic plight. The Yemeni economy is based on the open market system. But there is the interference of the corrupt government officials. The gross domestic production mounts to 2.8%, whereas oil revenues and expatriates transfers constitute the main resource for the foreign currency. The foreign aids were an important resource for income. The local and foreign reports said that the per capita is $481 annually. All the above is a diagnoses of the Yemeni problem.

The Yemeni economic problem started with the 1990 Unity. The political, social and economic burdens emerged substantially at that time. The economy was heavily dependent on expatriates' transfers and some of the aids since the seventies. These aids began to decrease and the expatriates transfers themselves began to decline due to the labor market changes in the Gulf countries. In early 80s, the expatriates' contribution declined from $2 bullions by half before the break out of second Gulf war in 1990.

The Yemeni Unity came at the time of the collapse of the Soviet Union. This led to the retardation of he Soviet economic aids. This disintegration left a loan of $8 billions.

In early 90s did the Gulf War erupted. About 2million Yemeni expatriates were obligatorily repatriated. This decreased their transfers to $300 millions. They also became unemployed workforce. There was the influx of refuges from the Horn of Africa. This created a demand on commodities and service. The Gulf aids stopped on the pretext that Yemen backed Iraq during the Gulf war. The merger of the Yemeni establishments after Unity resulted in redundancy in governmental posts. The government was compelled to sell its assets to cover their wages. In light of these disorders in the Yemeni institutions, the government made the reform initiative in 1991, which was known as the national reconstruction. The political conditions which grew into a crisis level, led to the proliferation of corruption and it ended with the crisis of 1994.The cost of this war was $11-13 billions. This is equivalent of the budget of six years.

As a result of this problem the per capita dropped to $280 by the end of 1994. The real reforms started with the World Bank and the International Monetary Fund in March 1995, to rejuvenate the shaky Yemeni economy as the government has asserted then. The reform programs concentrated on the issuing treasury bonds and the establishment of trade courts, and to make an industrial surveys and a number of projects were also to be privatize. The law of customs tariff and production laws were also to be amended. The import permits are to be cancelled. There were also many important items for the expected reform. The government was earnest in applying these reforms, but economic experts say that it succeeded in some, but there was a negative impact that hit the Yemeni people. There are serious social disorders that are lately aggravating, and they compelled the Yemeni government and the international authorities, including the World Bank, to find suggestions for those countries which think of applying any economic reforms. It is aiming at protecting the poor and the other vulnerable sectors.

Experts now see that the retreat of the government to subsidize the food stuffs led to a social disorder. This also resulted in economic slowing down, recession in gross domestic production and rise in the rate of inflation. Although the aim of the reforms was to enhance the economy, the wrong implementation led to increase of poverty and unemployment, in addition to deterioration of services.

Some studies owe the disorders to the rare and limited Yemeni resources in addition to the increase in population, to the extent that it became one of the highest in the world. Some of the conflicts, lack of stability, bad, spread of corruption and bribery and the weak follow up and domination of certain persons over the capitals of companies, all these led to the failure of the reform program.

Many reasons flared up the public rage. The most important of this are the spread of corruption and bribery. People think that the resultant of all these procedures will be for the benefit of those corrupts.

The question that arises now is that: is the government going to accompany these reforms with the other important reforms that will fight corruption and bring those who are accountable before the law?