World Bank Document No

A WORLD BANK COUNTRY STUDY PUB- 2151

PEOPLE'S DEMOCRATIC Public Disclosure Authorized REPUBLIC OF YEMEN A Review of Economic and Social Development Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized FILECOPY

MARCH 1979

PEOPLE'S DEMOCRATIC REPUBLIC OF YEMEN A Review of Economic and Social Development

This report is based on the findings of a missionto The People's Democratic Republic of Yemen in February/March 1978 consisting of: Shahid A. Chaudhry, chief of mission Abdallah Bouhabib, economist Michel Cretin, planning specialist Elco Greenshields, agricultural consultant The report was discussed with the PDRY government in November 1978.

Europe, Middle East and North Africa Regional Office The World Bank Washington, D.C., U.S.A. The World Bank issues country economic studies in two series. This report is a working document and is, as such, part of an informal series based wholly on materials originally prepared for restricted use within the Bank. The text is not meant to be definitive, but is offered so as to make some results of internal research widely available to scholars and practitioners throughout the world. A second, more formal series entitled World Bank Country Economic Reports is published for the Bank by The Johns Hopkins University Press, Baltimore and London. Titles of these and all other Bank publications may be found in the Catalog of Publications, which is available free of charge from World Bank, Publications Unit, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. This report is a free publication. A small charge may be made if airmail postage is required. The views and interpretations in this report are the authors' and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Copyright t?i 1979 The International Bank for Reconstruction and Development/The World Bank The World Bank enjoys copyright under Protocol 2 of the Universal Copyright Conven- tion. Nevertheless, reproduction of any part of this report is hereby granted provided that full citation is made. CURRENCY EQUIVALENTS

Currency Unit: Yemen dinar (YD)

1 YD - 1,000 fils

Currency Equivalents: Before December 1971

YD 1 - US$ 2.40

US$ 1 - YD 0.4167

,December1971 to February 1973

YD 1 - US$ 2.61

US$ 1 - YD 0.3831

Since February 1973

YD 1 US$ 2.90

US$ 1 - YD 0.3448

NOTE: Fiscal Years were from April 1 to March 31 until 1975. The 1975 fiscal year ended on December 31, 1975--andwas thereforeonly 9 months long. Since 1976 the fiscal year coincideswith the calendar year.

TABLE OF CONTENTS

Page No.

COUNTRY DATA MAP SUMMARY AND CONCLUSIONS

I. INTRODUCTION ...... I

Background to the Report ...... 1 The Physical Setting ...... 1 Political and Economic Structure Before 1967 1...... The Economy at Independence (1967) ...... 2 Socio-Economic Objectives and Institutional Changes .. 3 Major Achievements ...... 5 Outstanding Issues ...... 6

II. AN ASSESSMENT OF MACRO-ECONOMIC DEVELOPMENT...... 9

Growth of the Public Sector ...... 9 Development Programs ...... 10 Growth of National Income and Composition of Domestic Expenditures ...... 12 The Public Finances ...... 15 The Balance of Payments ...... 20

III. AN ASSESSMENT OF SECTOR DEVELOPMENT ...... 26

Sectoral Performance - An Overview ...... 26 Plant Agriculture and Livestock ...... 27 Fisheries ...... 30 Manufacturing and Mineral Resources ...... 34 Aden Refinery ...... 35 Transport and Communications ...... 37 Aden Port ...... 38

IV. AN ASSESSMENT OF SOCIAL DEVELOPMENT ...... 40

Income Distribution ...... 41 Regional Disparities ...... 41 Employment and Emigration ...... 43 Food and Nutrition ...... 44 Health ...... 46 Education ...... 47 Housing ...... 51

V. POSSIBLE DIRECTIONS OF FUTURE POLICY AND DEVELOPMENT PROSPECTS ...... 53

ANNEX - PLANNING PROCEDURES AND PUBLIC ADMINISTRATION 57

STATISTICAL APPENDIX 76

PDRY: COUNTRYDATA

AREA 1POPULATION DENSITY

337,800 sq. km 1.7 million (mid-1977) 5.1 per sq. km Rate of Growth: 2.61 (from 1973 to 1977)

POPULATION CHARACTERISTICS (1977) HEALTH (1977)

Crude Birth Rate (per 1,000) 49.6 Population per physician 8,100 Crude Death Rate (per 1,000) 20.6 Population per hospital bed 810

ACCESS TO PIPED WATER (1977) ACCESS TO ELECTRICITY (1975)

Occupied dwellings without 7. of Population - total 22 piped water (%) 77 - rural 1.6

NUTRITION (1977) EDUCATION (1976)

Calorie intake as % of requirements sO Adult literacy ra te () 32 Per capita protein intake (grams/day) 58 Primary school enrollment (%) 89

GNP PER CAPITA IN 1977: 1/ $320

NATIONALACCOUNTS GROSSDOHZSTIC PRODUCT IN 1976~ilGrwh(~ (market prices) IG 1976 1976 US$ million - US$ Million 1970/7 197/77ei_

GNP at Market Prices 470 100 GDP at factor cost 0- 326 7 Gross Domestic Investment 148 31 of which Gross National Savings 52 11 Agriculture & fishing 71 22 - 4 Exports of Goods, NiS 92 20 Industry9 / 27 8 -10 -2 imports of Goods, NFS 283 60 Trade, Transport, Finance 117 36 -6 7 Other Services il1 34 5 5

GOVNMENT FINANCE Plrelim. Est. 1974/75 1 1975 1976 1977 -- i-nY.DM.illionsusYemeni eDnar ----

Total receipts 24 17 32 40 Current expenditures 28 25 39 45 Revenue deficit -4 -8 -7 -s Developient expenditures 21 19 39 57 overall deficit -25 -27 -46 -62 Borrowing from Banking System 12 10 17 18 Other Assets and Accounts. 2 1 External financing 13 15 28 43

MONEY.CREDIT AND PRICES 1973 1974 1975 1976 1977 (million Y.D. Ouitsotandingend Period)

Money and quasi-money 49 55 67 98 140 Bank credit to government 17 24 3 62 73 Bank credit to non-Gov't. sector!/ 10 19 24 31 49

1/ The per capita GNP estimate calculated by the same conversion technique as the World Bank Atlas. All other conversions to dollars in the table are at the average exchange prevailing during the period covered. 2/Rough estimate. 3/ Includes petroleum refining. 7/ The overall negligible growth of the industrial sector is due to the decline in Aden Refinery production from 6.2 million tons in 1969 to 2.8 million tons in 1973 and 1.6 million tons in 1976--the non-petroleum industrial sector grew at an estisated rate of about 15 percent per annum between 1973-76. 5/ The fiscalyear was April 1-March 31 until March 31, 1975 when it became April 1-Dec. 31, 1975 and thereafter is on a calender year basis. 6/ includes current and development revenues anLd self-financing of public enterprises. 7/Net operationisof special funds (Price Stabilization fund, etc.). 8/Includes public sector agencies. Basic Data Sheet page 2 of 2

BALANCE OF PAYMENTS (US$ million) 1973 1974 1975 1976 1977

Domestic Exports, f.o.b. 1/ 14 8 8 26 29 Retained Imports, c.i.f. 1/ -120 -174 -165 -267 -324 Trade Deficit -106 -166 -157 -241 -295 Invisibles, net 54 70 76 145 205 Workers' Remittances 33 41 56 115 180 Others, net 21 29 20 30 25 Balance on Goods and Services -52 -96 -81 -95 -90

Official Transfers .. 1 10 46 55 Official M & LT Capital, net 25 48 31 58 , 68 Gross Disbursement 25 48 32 60 69 Repayments 2/ - -1 -2 -1 Miscellaneous Capital, net - 23 12. 16 -21 7 Overall Balance -4 -35 -24 -13 40

Net Foreign Assets, of Which: 74 39 15 2 42 Bank of Yemen's gross reserves 76 63 53 82 96 Use of IMF Credit .. -11 -28 -44 -44 Commercial Bank -2 -13 -10 -36 -10

MERCHANDISEEXPORTS Average 1976-77 US$ Million Percent

Fish & Fish Products 14.5 53 Cotton 7.0 25 Others 6.0 22

TOTAL. 27.5 100

EXTERNAL DEBT (DECEMBER 31, 1977) US$ Million External Public Debt Outstanding 431.5 Of which: Disbursed 240.7 Debt Service Payments 1977 1.5 Ratio of Debt Service to 1977 Exports of Goods and Services, Including Remittances 0.6 percent

RATE OF EXCHANGE

Prior to December 1971 As of December 1971 As of February 1973

US$1.00 = YD 0.42 US$1.00 - YD 0.38 US$1.00 - 0.34

YD 1.00 - US$2.40 YD 1.00 - US$2.61 YD 1.00 - US$2.90

1/ Net of re-exports 2/ Including errors and omissions December 28, 1978 _ __ _ _ d _ 18R D -1387L __~r~ ~ _B _ _ 50 OCTOBER19 TURKEY U.USSF. 46, 48a '

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-- INTERNATIONAL AIRPORT Al.Q aral, " Ahwor \ J ~~~~~~TaiztMsymirUS , 'B. ~~ Nobot~~~~~~~~~~~~~~ .~~~~~~~ HARBOR ~~ HR0 Ke D uki .AIH'(SShuqrah Mocha AND NUMBERS * , -AmForsh o U / OF G DLuahIlV 5F. GOVERNORATEBOUNDARIES

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SUMMARY AND CONCLUSIONS

Introduction i. Resource Base. PDRY (population 1.7 million) is one of the least- developed countries in the world with a 1977 per capita income estimated at $320 (World Bank Atlas Methodology). The country is poor in natural resources -- arable land amounts to only 80,000 ha or 0.2 percent of its land surface and significant mineral deposits have not yet been identified. Its assets comprise a talented labor force (including a substantial number working in other countries and sending back remittances to their families), fishery resources, and the region's best natural harbor (Aden). ii. Socio-economic Objectives and Institutional Change. In order to break PDRY out of its traditional economic and sopial structures and in keeping with its socialist philosophies, the Government of PDRY (after the "Corrective Movement of June, 1969") articulated the following major development objectives: (i) significant production and distribution entities taken over by the State, (ii) orientation of the economy from services to productive sectors, (iii) equitable income distribution, and (iv) provision of basic human needs. Accordingly institutional change in the economy has centered around (i) nationalization of foreign economic operations; 1/ (ii) absorption of all major economic operations (e.g. banking, insurance, foreign trade, Aden Port activities) by the state with one significant exception (joint ventures between the Government and private sector in industry); (iii) agrarian reform with much of the cultivable land being turned into State or co-operative farms; and (iv) extension of the co-operative movement to other traditional sectors. iii. Development policy in PDRY is sought to be pursued within the framework of comprehensive social and economic planning. PDRY has undergone two planning cycles. The first, the Three-Year Development Plan (1971/72-1973/74), laid the foundations of planning in PDRY. The second, the Five-Year Develop- ment Plan (1973/74-1978) is just being completed. Actual plan expenditures have varied considerably from plan expectations because of their dependence on foreign financing. Thus the global investment targets for 1971/72-1973/74 were YD 40 million in 1971/72 prices; these had subsequently been reduced to YD 32 million, current prices; and the actual expenditure was YD 25 million (77 percent). For the 1974/75-1978 plan the situation has been completely reversed; the initial overall target for investment was YD 75 million; this has been regularly revised upwards to, most recently, YD 276 million. Expendi- tures during the five years of the plan are estimated to reach YD 196 million.

1/ The Aden Refinery was exempted from nationalization in 1969 but has since (May 1977) been transferred to PDRY by British Petroleum who have stayed on as technical advisors. - ii -

iv. The sectoral composition of investment (emphasizing agriculture, fisheries, communications and related infrastructure) appears to be well balanced in relation to PDRY's requirements. However, an examination of the project content of the investment program reveals a continued stress on "bulky" projects. Thus in agriculture the emphasis has been on "horizontal" rather than "vertical" expansion; in fisheries on the acquisition of a modern fishing fleet (and associated infrastructure) rather than on providing facilities and supplies to the fishing sector as a whole.

Major Achievements v. Economic Development. The policies of the Government have resulted in substantial achievements in both economic and social development. The growth of the public sector and Government control over economic resources has been accompanied with effective management of the pattern and composition of public expenditures. Private consumption has been austere, and increases in public consumption have been reflected in the extension of social services across the country. Investment expenditures have increased dramatically--reaching an estimated 31 percent of GNP in 1977 compared to less than 2 percent in 1970. These latter expenditures have been undertaken within the context of sectorally well-balanced investment programs. As a result PDRY has experienced substantial economic growth (GDP growth in real terms is estimated to have averaged about 7 percent per annum between 1973-1977) and also developed its economic infrastructure which now provides an important basis for further economic growth. Domestic resource mobilization has been vigorously pursued through widening the tax base and control over Government consumption; and the total domestic resource mobilization effort (over 20 percent of GNP in 1977) indicates fairly impressive performance by a country with very limited resources and a low per capita income (estimated at $320 in 1977; World Bank methodology). The balance of payments, while still showing great vulnerability on the commodity accounts (commodity exports cover less than 10 percent of commodity imports), has strengthened considerably as a result of the growth of workers' remittances and Aden Port-associated activities. PDRY's total foreign exchange earnings (from exports of goods and services) covered about 70 percent of PDRY's foreign exchange expenditures in 1977. vi. Sectoral Development. The socialization of the economy affected some sectors (e.g. agriculture and traditional fisheries production) much more acutely than others. However, except for agricultural crop production (which now accounts for about 7 percent of GDP and which appears to be facing serious productivity problems) all major sectors have experienced substantial growth in the period 1973-1976. Fisheries production (now comprising almost 10 percent of GDP) has grown by almost 8 percent per annum in real terms (largely through modern fishing fleet operations--the traditional fisheries sector experienced only marginal growth). Industry, 1/ although still fairly small (8 percent of GDP) has grown by about 15 percent per annum. Transport, communications and commerce, benefitting from substantial investments (and also the

1/ Excluding the Aden refinery. - iii - opening of the Suez Canal) have also shown impressive growth (12 and 7 percent per annum respectively). Overall, these sectoral developments have laid down the essential rudiments of an integrated and development-oriented economy. vii. Social Development. PDRY's record of social development is impressive. Except for the difficult problem of urban/rural disparity,great progress has been made in equalizing income distribution (including distribution of assets) and meeting the basic needs of the people. Essential food supplies are available in sufficient quantities in the urban areas, and are affordable through the institution of minimum wages and selective food subsidies. The Government has also initiated programs to secure adequate food supplies in rural areas. Education and health facilities are free, and are being gradually expanded through all parts of PDRY.

Outstanding Issues viii. Productivity. Increasing productivity in certain sectors is one of the most important issues facing PDRY today. The substantial enlargement of the sphere of public sector operations and structural and institutional change in major sectors is in part responsible for this situation. Productivity issues are most prominent in co-operative production (largely in agriculture and fisheries). Agricultural co-operatives are responsible for the major portion of crop-production in PDRY and there is evidence that production of some major crops has declined between 1973-1976 despite substantial investments in the sector. Productivity is also low in the traditional fisheries sector re-organized into co-operatives. As a result average agricultural and fisheries income in the co-operative sector (which is not regulated by minimum wages) is about 50 percent below the minimum wage level and about one-third the average income from employment in the rest of the economy. ix. Serious questions also arise with regard to efficient utilization of manpower. In the public sector which employs most of the urban labor force, there are growing imbalances between office employees and manual workers. Serious labor shortgages have appeared in critical occupations (e.g. construction) largely as a result of inadequate incentives to compensate for the hardship of outdoor work. The problem is compounded by a general shortage of skills, both in manual and office employment, which can only be gradually overcome through more intensive training and education. A third issue concerns the low productivity and underemployment of the rural labor force. More than half of PDRY's manpower potential falls into this category. The Govern- ment is aware of this situation and is trying to remedy this in the next (1979-83) Five-Year Plan. x. A different, but important productivity issue is associated with the recent acquisition of the 8.5 million ton Aden oil refinery which is presently operating at annual throughput levels of less than 2 million tons. This level of operation is not enough to enable the refinery to break-even (i.e. cover operating costs and depreciation). Break-even throughput is estimated at 3.4 million tons. To reach this level of processing, adequate supplies of crude will have to be secured and marketing outlets for the products will have to be established. Moreover, as the refinery uses old - iv - equipment and partly obsolete technology substantial investments would be required to make it competitive in the world market. Unless these problems are solved, the refinery may prove to be a net drain on the economy. xi. Mobilization of Foreign Resources. Total resources available to PDRY (both domestic and foreign) have in large part been utilized effectively. PDRY's narrow resource base, however, has resulted in a situation where the country's investment program as well as some consumption expenditures have been largely financed through external resource transfers. Thus the deficit on goods and non-factor services reached about 51 percent of GDP in 1976 and an estimated 55 percent in 1977. Of this about half was financed through workers' remittances and the rest through external assistance. Given the importance of the external resource transfers, their continued mobilization is an important issue facing PDRY today. The level of workers' remittances and foreign assistance has increased markedly in the recent past, yet the potential of both these sources does not appear to have been fully utilized. The growth of workers' remittances would be further increased if more incentives are given to migrant workers. The Government is aware of this requirement and has, in fact, recently liberalized the regulations for direct imports by Yemenis working abroad. The Government will also have to give continued attention towards securing longer-term committments to PDRY's economic development from external aid donors, particularly the oil producing Arab countries. xii. Income Distribution and Rural Poverty. Despite substantial advances made in the provision of basic needs (education, health etc.) in PDRY, urban/ rural disparities continue. As mentioned earlier, rural incomes in the agricultural and fisheries sector are estimated to be about one-third the level prevalent in urban areas and there appears to be strong evidence that the extent of the disparity is such that rural food consumption may be inadequate. Some rural families survive only through remittances from family members abroad. PDRY's policy makers appear to feel that rural disparities have been aggravated because of population dispersion (e.g. bedouins, fishermen and even isolated farm families) and think a solution may be found through redistributing and regrouping the entire rural population into 54 agricultural and 22 fishery centers. Such a move, even if it could be implemented, however, is unlikely to solve the problem. The basic reasons for rural poverty appear to lie in the low productivity of the agricultural and fisheries sector and also in the likelihood that the terms of trade are adverse between these sectors and the rest of the economy. The solutions therefore must lie in tackling these basic issues. This, however, will take time. xiii. Planning and Management. While investment planning and project implementation have so far been fairly efficiently undertaken in PDRY, there is an urgent need to extend the scope of planning to integrate all important areas of economic decision-making. Responsibility for formulating economic policies is spread over several agencies and does not appear to be centrally coordinated. The Planning Ministry appears to be ideally suited to perform this function and should be strengthened through a variety of mechanisms including: (i) improving the reliability of the data available through the Central Statistical Office; (ii) development of macro-economic analysis -v - capabilities;(iii) strengtheningits project preparationbase; and (iv) stream-liningthe monitoring system for developmentprojects. xiv. The question of efficientmanagement of Public Sector Corporations (which now encompassthe bulk of modern sector economic activity in the PDRY) will inevitablydetermine the degree of successof PDRY's public sector- oriented economy. Policy makers in PDRY have endeavoredto build important safeguards into the managerial system includingworkers' representationand "official surveillancecommittees". These have had remarkable success in virtually eliminatingcorruption within the public enterprisesand have also controlled labor absenteeism. However, there remains the need of increasing the managerial efficiency of public enterprises. Areas in which inefficient management of public corporationscause losses to the economy include the distributionsector (e.g. agriculture),and the inadequatesurpluses generated by public enterpriseswith consequent losses in domestic savings. Improving management of public enterpriseswill require, amongst other things, the introductionof a uniform system of financialaccounts and intensivein- service training programs at the technical and management levels.

DevelopmentProspects xv. Recent economic developmentshave been dominated by the favorable impact of increased foreign resource transfer (through both workers' remittances and foreignassistance) to PDRY during 1976 and 1977. Commodity imports doubled in current prices between 1975 and 1977 creating an upsurge of import-inducedeconomic activity in almost all sectors of the economy. In addition,because of the growth of workers' remittances,real national income is estimatedto have increasedby an estimated 28 percent in 1976 and 15 percent in 1977. The state budget also benefitted substantially -- both directly through increases in receipts from customs duties and indirectly through the increase in profits of public sector finance and trading corporations (65 percent of the increase in revenue receipts between 1974/75 to 1977 are import related). Domestic fixed investments (financed almost entirely through foreign aid) also doubled in the period 1975 to 1977.

xvi. Given this dependence on external resource transfers, the volume of foreign exchange available to PDRY will critically influence its future development prospects. Both the inflow of workers' remittances and foreign assistance to PDRY have shown instability in the past and it is likely that this situation will continue in the immediate future. To be realistic, the report examines the prospects for medium-term development of the PDRY economy in terms of alternative scenarios which differ primarily with regard to foreign exchange availability.

xvii. The first scenario reviews the implication of essentially unchanged policies, especially in the fields of productivity and external resource mobilization (see paragraphs viii to xi above). This is likely to result in slow growth of workers' remittances, and a stagnant level of foreign aid. Imports would be severely constrained placing strict limitations on investment and domestic production. This would leave very little scope for a real increase in private per capita consumption, and existing poverty conditions in rural areas would persist in the foreseeable future. - vi- - xviii. The second scenario, on the other hand, assumes effectivedomestic economic policies aimed at increasingproductive efficiency,especially in agriculture,and also measures to further increase workers' remittancesand active pursuit of foreign assistance. Such a redirectionin policy could lead to much higher levels of workers' remittances and foreign aid. This would allow substantiallyhigher imports, permit the financing of a large public investment program, encourage private investment,and lead to a higher rate of growth of domestic product (9 percent per annum in real terms). This growth would be the result not only of the higher level of imports and investmentbut also of institutionalchanges which encourage agriculturaland fisheries production and improves the efficiencyof public corporations. In addition, the higher volume of total resourcesavailable would allow the Government to increase public consumption (in particular the delivery of social services) and to substantiallyincrease private consumptionby individual citizens.

Conclusion xix. PDRY has demonstratedsignificant ability in firmly pursuing economic developmentdespite the many resource constraintsunder which it operates which include a low per capita GDP, small population base, harsh natural conditions and absence of significantnatural resources. These resource constraintswill inevitably influence future development. Accordingly, future economic development must concentrateon maximizing the potential of resources availableto PDRY, including its talented labor force. The implementationof policies geared at increasingthe productivityof PDRY's economic institutions,reinforcing social development (includingthe removal of urban/rural disparities), and ensuring effective planning and management of public organizations,should, in conjunctionwith the mobilizationof external resources substantially further the process of economic development in PDRY. CHAPTER I

INTRODUCTION

Background to the Report

1.1 The last Bank updating economic memorandum (Report No. 1231a-YDR, dated October 11, 1976) was based on the findings of an economic mission which visited PDRY in February 1976. Important subsequent developments in PDRY have related to (i) the large amounts of foreign resource transfers which have taken place (both through increased workers remittances and substantial amounts of foreign assistance) which have accelerated incomes, investments and growth; and (ii) the completion of a "decade of development" in PDRY and the beginning of the process of formulation of a Five Year Plan for the period 1979-83. This mission has accordingly sought to review the development experience of PDRY in both the productive and social sectors and the policy issues which have emerged therein. Its focus is on the structural changes which have taken place in the economy and the potential for future development.

The Physical Setting

1.2 The People's Democratic Republic of Yemen (PDRY) encompasses about 334,000 square km of territory located in the south of the Arabian Peninsula and the islands of Perim (300 square km) and Socotra (3,500 square km). Topo- graphically the mainland (where almost the entire population and economic activity is located) may be divided into (i) the coastal zone, about 12-25 km wide, extending along the Arabian Sea for about 1,200 km; and (ii) the plateaus and highlands of the interior. The coastal zone - whilst being generally dry - has one of the region's finest natural harbors (Aden) and substantial fish resources. Inland, the country is generally dry and moun- tainous. A rugged topography creates severe difficulties for internal communication resulting in high domestic transport cost. The absence of permanent water streams limits agricultural production to about 80,000 ha (0.2 percent of the country's land area). There are, however, several million acres of sparse grazing lands spread across the country.

Political and Economic Structures Before 1967

1.3 PDRY became independent in 1967 after nearly 130 years of British colonial rule. The population at this time was variously estimated to number between 1.2 to 1.4 million people of whom between 450-500 thousand were living in urban areas and engaged in largely service-oriented activities. The remainder of the population was rural, largely agricultural (450-600 thousand), bedouin (120-150 thousand) or engaged in fishing and other activities. The economy was strongly dualistic in nature. The 'modern' sector centered almost entirely around Aden with its position as the center of Government (which included until the last days of British rule a substantial British military base) and Aden Port associated activities (viz. import and transit trade, free zone activities largely catering to visiting ship passenger traffic, bunkering and refining activities). The rest of the areas now comprising PDRY by and large had experienced little or no change in social or economic structures. Overall, the country ranked as one of the poorest in the world. -2-

1.4 The 'modern' sector was dominated by a few large foreign corporations and a number of merchants of domestic and foreign origin (the latter being largely from the Indo-Pakistan subcontinent). Foreign corporations controlled banking, insurance, tourism, trade, distribution of petroleum products, shipping, bunkering, dockyards, harbor transportation, and the only large scale manufacturing installation - the Aden Refinery. The bulk of the remaining commercial activities in Aden were in the hands of a few large merchants. Ownership of assets in the rest of the economy outside Aden was organized on traditional - largely feudal- grounds. Tribal rulers and associated family members enjoyed ownership rights to a significant portion of the country's arable land. This was particularly true in the coastal areas (e.g. Lahej and Abyan) and the Hadramaut where almost 80 percent of the land was cultivated by tenants. However, there were some areas where land was more evenly distributed - e.g. in Beihan approximately two-thirds of the cultivated land is be- lieved to have been worked by the owners themselves. In the fisheries sector also, except for owner-operated "houris" (canoes), the larger traditional fishing vessels (rsambuks") were owned by tribal chieftains or fish merchants.

1.5 The political situation in Aden during the last years of colonial rule was influenced by two major factors (i) the overthrow of the traditional Imamate in Northern Yemen in 1962 and the subsequent civil war; and (ii) the emergence of a strong labor oriented political movement in Aden which grew into an active front fighting for national liberation with support in both urban and rural areas. As a result, political power was transferred at independence to the National Liberation Front (NLF).

The Economy at Independence (1967)

1.6 The development problems confronting the PDRY at independence (November 1967) were substantial. The modern sector of the economy was in acute depression as a result of the closure of the Suez Canal in June, 1967 and the subsequent precipitious decline in Aden Port related activities. The situation was further complicated by the cessation of British budgetary support (which averaged about YD 14 million annually during 1966-67 and was larger than the Government's current annual revenues of about YD 9 million) and the withdrawal of British troops (whose local expenditures in foreign exchange averaged an additional YD 12-15 million annually). Total foreign exchange receipts are estimated to have declined by more than 40 percent between 1966 and 1968. As a result of all these factors, there was a sharp decline in aggregate economic activity. Whilst accurate national accounts for this period are not available, it is estimated that PDRY's GDP dropped by about 20 percent between 1966 and 1968 with the sharpest drop being experienced in the services and construction sectors (only subsistence sectors like agriculture and fisheries maintained their previous output levels). Aden proper was most affected. Regional income dropped by 30-35 percent leaving roughly 20,000- 25,000 people without employment.

1.7 The initial reaction of the national Government centered around imposing strict austerity in Government expenditures. Expenditures on all sectors (including defense) were drastically curtailed. 1/ Wages of Govern- ment employees were reduced--in some cases by as much as 60 percent. Strong efforts were also made to mobilize additional resources through increased tax measures and more rigorous tax collection. Given the depressed economic situation, however, additional resource mobilization was painfully slow. The budget, therefore, continued to suffer deficits on current accounts. Foreign assistance in this period was insubstantial. There was consequentially almost no public sector fixed investment and marginal private investment in the post- independence period from 1967-1970.

Socio-Economic Objectives and Institutional Change

1.8 PDRY's economic and social objectives center around the determina- tion of the NLF to develop PDRY through the pursuit of the NLF's interpreta- tion of "scientific socialism". On an aggregate level these envisage an economy with the following features: (i) significant production and distribution mechanisms socialized by the state; (ii) orientation of the economy from services to productive sectors; (iii) development of a materials and technical base; (iv) equitable income distribution; and (v) provision of basic human needs, including appropriate cultural and educational services.

1.9 In order to achieve the above objectives, the Government has undertaken fundamental changes. These broadly center around the extension of Government ownership and control over all significant economic entities, redistribution of assets, and social reform.

1.10 The prime instrument for extending public ownership to the largely foreign owned "modern" sector was the nationalization law of 1969. 2/ This nationalized the country's eight banks (of which seven were foreign) and amalgamated them into the National Bank of Yemen. Twelve insurance companies (foreign) were nationalized and amalgamated into "The Insurance and Reinsurance Company"; all others were placed under liquidation. Five major trading companies (all foreign) were nationalized and established into two companies -- "The National Corporation for Foreign Trade" and "The National Home Trade Company". All Aden Port service companies (excluding bunkering operations) were nationalized and placed under a "Ports Board". Finally all five petroleum distribution companies (foreign) operating in PDRY were nationalized and placed under a "Petroleum Board". Whilst no subsequent nationalization of foreign properties has taken place since then, the last two major foreign-owned installations--the Aden Refinery (British Petroleum) and an international communications facility (Cable and Wireless) were transferred by mutual consent to PDRY in May 1977 and April 1978, respectively. The only wholly foreign-owned companies now operating in Yemen are the bunkering facilities of major oil companies in Aden harbor. A law governing foreign (and local) industrial

1/ The Governent current expenditures were reduced from YD 23.7 million in 1967/68 to YD 15.2 million in 1968/69.

2/ "Law for the Economic Organization of the Public Sector and National Planning", Law Nq. 37 of 1969. investment was promulgated in 1971 and amended in 1972. No major foreign investments in the industrial sector have yet taken place. However, the Japanese fishing company "Nichiro" has been operating in PDRY waters under a royalty agreement since the early 70's. Several foreign oil companies (including Siebens of Canada and AGIP of Italy) are also prospecting for oil under production-sharing agreements. PDRY also operates a joint fishing venture with the USSR.

1.11 Assertion of public control and redistribution of domestically-owned assets were undertaken in the fields of agriculture, fishing and housing. Agrarian reform (limiting private ownership to 25 acres for irrigated and 50 acres for unirrigated land) was first enacted in 1968 but not implemented. A second agrarian reform law (confiscating the lands of former rulers and agents of former Governments and limiting land holdings to 20 acres for irrigated and 40 acres for rainfed land per individual or twice this limit per family) was promulgated in 1970. Party-encouraged peasant uprisings completed this process by 1972 when almost all arable land (except a few isolated tracts) was reorganized into state farms or cooperatives. The latter include two types of membership. Traditional owner-operators and beneficiaries of land reform own small plots of land; they sell their produce to the cooperative and purchase from it vital inputs and services such as water, fertilizer, pesticides, machine cultivation, etc. Other members of the cooperative farm large tracts of land collectively under production and income sharing arrangements. The "Cooperatives Law" (1972) also extended to the fisheries sector which was reorganized so that all capital assets for fishing (boats, nets, etc) became the property of the cooperative. Handicraft cooperatives (encompassing traditional manufacturing) and consumer (retail trade) cooperatives were also established.

1.12 The assertion of public ownership over major sectors of the economy was accompanied by substantial public sector investments rising from less than YD 1 million in 1970 to YD 57 million in 1977. Private investment in this period was minimal (about YD 1 million p.a.)--and was largely confined to the construction of individual housing for family use by Yemeni emigrants abroad. As a result, the public sector in PDRY now encompasses all major fields of economic activity.

1.13 The Government has sought to provide for basic social needs through a variety of mechanisms including the nationalization of all housing (except owner-occupied dwellings) in 1972; institutionalizing adult education, 1973; enactment of family laws governing marriage and the rights of women, 1974; the expansion of health services; and the institution of minimum wages (in the Government and public sector excluding cooperatives) together with the regulation of prices of basic consumer goods through the establishment of a Price Stabilization Fund (1974). These institutional changes have been intended to reinforce the substantial enhancement of both investment and recurrent expenditures in the social sectors. -5-

Major Achievements

1.14 Economic Development. The policies of the Government have resulted in substantial achievements in both economic and social development. The growth of the public sector and Government control over economic resources has been accompanied with effective management of the pattern and composition of public expenditures. Private consumption has been austere, and increases in public consumption have been reflected in the extension of social services across the country. Investment expenditures have increased dramatically-- reaching an estimated 31 percent of GNP in 1977 compared to less than 2 percent in 1970. These latter expenditures have been undertaken within the context of sectorally well-balanced investment programs. As a result PDRY has experienced substantial economic growth (GDP growth in real terms is estimated to have averaged about 7 percent per annum between 1973-1977) and also developed its economic infrastructure which now provides an important basis for further economic growth. Domestic resource mobilization has been vigorously pursued through widening the tax base and control over Government consumption; and the total domestic resource mobilization effort (over 20 percent of GNP in 1977) indicates fairly impressive performance by a country with very limited resources and a low per capita income (estimated at $320 in 1977; World Bank methodology). The balance of payments, while still showing great vulnerability on the commodity accounts (commodity exports cover less than 10 percent of commodity imports), has strengthened considerably as a result of the growth of workers' remittances and Aden Port-associated activities. PDRY's total foreign exchange earnings (from exports of goods and services) covered about 70 percent of PDRY's foreign exchange expenditures in 1977.

1.15 Sectoral Development. The socialization of the economy affected some sectors (e.g. agriculture and traditional fisheries production) much more acutely than others. However, except for agricultural crop production (which now accounts for about 7 percent of GDP and which appears to be facing serious productivity problems) all major sectors have experienced substantial growth in the period 1973-1976. Fisheries production (now comprising almost 10 percent of GDP) has grown by almost 8 percent per annum in real terms (largely through modern fishing fleet operations--the traditional fisheries sector experienced only marginal growth). Industry, 1/ although still fairly small (8 percent of GDP) has grown by about 15 percent per annum. Transport, communications and commerce, benefitting from substantial investments (and also the opening of the Suez Canal) have also shown impressive growth (12 and 7 percent per annum respectively). Overall, these sectoral developments have laid down the essential rudiments of an integrated and development-oriented economy.

1.16 Social Development. PDRY's record of social development is impressive. Except for the difficult problem of urban/rural disparity (discussed in paragraph 1.21 below) great progress has been made in equalizing income distribution (including distribution of assets) and meeting the basic needs of the people. Essential food supplies are available in sufficient quantities in the urban areas, and are affordable through the institution of minimum wages

1/ Excluding the Aden refinery. - 6 - and selective food subsidies. The Government has also initiated programs to secure adequate food supplies in rural areas. Education and health facilities are free, and are gradually expanded through all parts of PDRY.

Outstanding Issues

1.17 Productivity. Increasing productivity in certain sectors is one of the most important issues facing PDRY today. The substantial enlargement of the sphere of public sector operations and structural and institutional change in major sectors is in part responsible for this situation. Productivity issues are most prominent in co-operative production (largely in agriculture and fisheries). Agricultural co-operatives are responsible for the major portion of crop-production in PDRY and there is evidence that some major crops have declined between 1973-1976 despite substantial investments in the sector. Productivity is also low in the traditional fisheries sector re-organized into co-operatives. As a result average agricultural and fisheries income in the co-operative sector (which is not regulated by minimum wages) is about 50 percent below the minimum wage level and about one-third the average income from employment in the rest of the economy.

1.18 Serious questions also arise with regard to efficient utilization of manpower. In the public sector which employs most of the urban labor force, there are growing imbalances between office employees and manual workers. Serious labor shortages have appeared in critical occupations (e.g. construction) largely as a result of inadequate incentives to compensate for the hardship of outdoor work. The problem is compounded by a general shortage of skills, both in manual and office employment, which can only be gradually overcome through more intensive training and education. A third issue concerns the low productivity and underemployment of the rural labor force. More than half of PDRY's manpower potential falls into this category.

1.19 A different, but important productivity issue is associated with the recent acquisition of the 8.5 million ton Aden oil refinery which is presently operating at annual throughput levels of less than 2 million tons. This level of operation is not enough to enable the refinery to break-even (i.e. cover operating costs and depreciation). Break-even throughput is estimated at 3.4 million tons. To reach this level of processing, adequate supplies of crude will have to be secured and marketing outlets for the products will have to be established. Moreover, as the refinery uses old equipment and partly obsolete technology substantial investments would be required to make it competitive in the world market. Unless these problems are solved, the refinery may prove to be a net drain on the economy.

1.20 Mobilization of Foreign Resources. Total resources available to PDRY (both domestic and foreign) have in large part been utilized effectively (para 1.15 above). PDRY's narrow resource base, however, has resulted in a situation where the country's investment program as well as some consumption expenditures have been largely financed through external resource transfers. Thus the deficit on goods and non-factor services reached about 51 percent of GDP in 1976 and an estimated 55 percent in 1977. Of this about half was - 7 -

financed through workers' remittances and the rest through external assistance. Given the importance of the external resource transfers, their continued mobilization is an important issue facing PDRY today. The level of workers' remittances and foreign assistance has increased markedly in the recent past, yet the potential of both these sources does not appear to have been fully utilized. The growth of workers' remittances could be further increased if more incentives are given to migrant workers. The Government is aware of this requirement and has, in fact, recently liberalized the regulations for direct imports by Yemenis working abroad. The Government will also have to give continued attention towards securing a longer-term committment to PDRY's economic development from external aid donors, particularly the oil producing Arab countries.

1.21 Income Distribution and Rural Poverty. Despite substantial advances made in the provision of basic needs (education, health etc.) in PDRY, urban/ rural disparities continue. As mentioned earlier, rural incomes in the agricultural and fisheries sector are estimated to be about one-third the level prevalent in urban areas and there appears to be strong evidence that the extent of the disparity is such that rural food consumption may be inadequate. Some rural families survive only through remittances from family members abroad. PDRY's policy makers appear to feel that rural disparities have been aggravated because of population dispersion (e.g. bedouins, fishermen and even isolated farm families) and think a solution may be found through redistributing and regrouping the entire rural population into 54 agricultural and 22 fishery centers. Such a move, even if it could be implemented, however, is unlikely to solve the problem. The basic reasons for rural poverty appear to lie in the low productivity of the agricultural and fisheries sector and also in the likelihood that the terms of trade are adverse between these sectors and the rest of the economy. The solutions therefore must lie in tackling these basic issues.

1.22 Planning and Management. While investment planning and project implementation have so far been fairly efficiently undertaken in PDRY, there is an urgent need to extend the scope of planning to integrate all important areas of economic decision-making. Responsibility for formulating economic policies is spread over several agencies and does not appear to be centrally coordinated. The Planning Ministry appears to be ideally suited to perform this function and should be strengthened through a variety of mechanisms including: (i) improving the reliability of the data available through the Central Statistical Office; (ii) development of macro-economic analysis capabilities; (iii) strengthening its project preparation base; and (iv) stream-lining the monitoring system for development projects. These issues are discussed in detail in Annex I of this report.

1.23 The question of efficient management of Public Sector Corporations (which now encompass the bulk of modern sector economic activity in the PDRY) will inevitably determine the degree of success of PDRY's public sector- oriented economy. Policy makers in PDRY have endeavored to build important safeguards into the managerial system including workers' representation and "official surveillance committees". These have had remarkable success in virtually eliminating corruption within the public enterprises and have also controlled labor absenteeismetc. However, there remains the need of increasing the managerial efficiency of public enterprises. Areas in which inefficient management of public corporationscause losses to the economy include the distributionsector (e.g. agriculture),and the inadequate surpluses generated by public enterpriseswith consequent losses in domestic savings. Improvingmanagement of public enterpriseswill require, amongst other things, the introductionof a uniform system of financial accounts and intensive in- service training programs at the technical and management levels.

1.24 PDRY's substantialeconomic and social achievementsand present policy issues summarized above are discussed further in the following chapters. - 9 -

CHAPTER II

AN ASSESSMENT OF MACRO-ECONOMICDEVELOPMENT

Growth of the Public Sector

2.1 PDRY's economic policies have been aimed primarily at developing and consolidatingimportant segments of the economy under state ownership and control. As discussedearlier the nationalizationsof 1969 were aimed primarily at the largely foreign-ownedfinancial, trade and services sectors. Re-organizationof the major domestic productionsectors was initiatedwith agrarian reform and culminatedwith the socializationof the agricultural, fisheriesand artisanal sectors (largely through cooperatives). The subsequent enlargementand growth of the public sector has been through re- organizationand investmentin the sectors designated for public ownership.

Table 2.1: DISTRIBUTIONOF SECTORAL PRODUCTION / BY TYPE OF ORGANIZATION (Percent)

Joint /2 Private Cooperative Ventures- State Foreign Total

Industry /3 1973 51 -- 7 6 36 100 1976 38 -- 24 28 10 100

Agricultural Crops 1973 -- 81 -- 19 -- 100 1976 -- 71 -- 29 -- 100

Livestock 1973 97 -- -- 3 -- 100 1976 93 -- -- 7 -- 100

Fisheries 1973 -- 51 10 -- 39 100 1976 -- 26 9 16 49 100

Transportat ion 1973 43 1 -- 56 -- 100 1976 58 -- -- 42 -- 100

Construction 1973 22 -- -- 42 36 100 1976 19 -- -- 60 21 100

/1 Gross Value of Production,Market Prices /2 State and private. 7Ti Includingthe Aden Refinery Source: Ministry of Planning and World Bank estimates. - 10 -

2.2 As Table 2.1 indicates, agricultural crop production is entirely (with insignificant exceptions) in the hands of cooperatives and the state. Livestock production, on the other hand, still is almost entirely (over 90 percent) in private hands (an estimated 30 percent by nomads), although the role of the state in poultry farming has become substantial. In the fisheries sector a major portion (over 40 percent) of production is attributable to the activities of a Japanese fishing company operating under royalty. The Govern- ment has also started a modern fishing fleet which accounted for about 16 percent of total value of production in 1976 - the rest of fishery production is in the hands of cooperatives (with the exception of certain subsistence fishermen in the Fifth and Sixth Governorates). Large scale industrial production is in government hands, although the private sector still accounts for a substantial portion of industrial production (about 38 percent in 1976) largely in the form of small scale industrial units. No new wholly private sector industrial unit has been commissioned since 1972. However, joint venture (i.e. state plus private sector) production is being encouraged and becoming increasingly important -- it accounted for over 20 percent of the value of industrial production in 1976. Government capacity to undertake substantial construction activity has been rapidly increased -- although the "foreign" sector (largely Russian and Chinese) remains substantial. Trans- portation is characterized by a large private sector (mostly individual freight lorry operators under Government regulation). Private individuals also operate the bulk of small scale retail and service establishments in the country. The overall picture is that whilst the state dominates economic activity, small-scale individual enterprise is allowed in certain circumstances in order to minimize the bureaucratic complexities of a socialist system.

Development Programs

2.3 Development policy in PDRY is sought to be pursued within the framework of comprehensive social and economic planning. However, a comprehensive agency for integrating or analyzing all major economic decisions does not exist (other than perhaps in the Economic Secretariat of the Politburo of the National Front) and responsibility for formulation of pertinent policies is divided among several agencies (see Annex I on planning).

2.4 The technical aspects of investment planning and implementation are undertaken by the Ministry of Planning under the guidance and surveillance of the National Front. PDRY has undergone two planning cycles. The first, the Three-Year Development Plan (1971/72-1973/74), laid the foundations of planning in PDRY. The second, the Five-Year Development Plan (1974/75-1978), is in its last year of implementation. These plans have pursued broadly similar objectives, namely (a) diversification of the economy by strengthening the productive public sector (agriculture, fisheries, and import substituting industry, (b) developing the basic infrastructure of the country (road network, ports, power, etc.), (c) providing urgently needed education and health services to all population groups, (d) assessing the natural resources of the country for further development through geological and mineral surveys. The - 11 - main change occurred in the manpower situation: whereas the first plan was primarily concerned with job creation through labor intensive public investment programs, it became obvious during the second plan period that the shortage of manpower, skilled and unskilled, was one of the major bottlenecks and the emphasis was progressively shifted away from labor intensive projects.

2.5 Actual plan expenditures have varied considerably from plan expectations because of their dependence on foreign financing. 1/ Thus the global investment targets for 1971/72-1973/74 were YD 40 million in 1971/72 prices; these had subsequently to be reduced to YD 32.4 million, current prices; and the actual expenditure was YD 25 million (77%). For the 1974/75-1978 plan the situation has been completely reversed; the initial overall target for investment was YD 75 million; this has been regularly revised upwards to, most recently, YD 276 million.

2.6 Of the YD 136 million spent so far in the second plan (i.e. through December 1977), 13 percent (YD 17.7 million) has gone to the development of industry, 21 percent (YD 29.1 million) to agriculture, 15 percent (YD 20.9 million) to fisheries, 25 percent (YD 34.6 million) to communications and works, 7 percent (YD 9.1 million) to geological and mineral surveys; and the rest -- 19 percent or YD 24.6 million -- spent on the social sectors. The sectoral composition of investment appears to be well balanced in the context of PDRY's development needs. However, a review of the project content of the investment program reveals a consistent emphasis on large scale 'bulky' projects. Whilst this may have been necessary in many cases given PDRY's early stage of development and the need to create economic infrastructure, it has also resulted in a lack of qualitative improvement of the traditional sectors. Thus in agriculture the emphasis has been on 'horizontal' rather than 'vertical' expansion; in fisheries on the creation of a large scale fishing fleet rather than on improving the productivity of fishermen in cooperatives etc. This has created imbalances in some sectors which need to be remedied. This is discussed further in Chapter III.

1/ Almost 90 percent of development expenditures in the first plan and 75 percent development expenditures to date in the current Five-Year Plan have been financed from external sources. - 12 -

Table 2.2: GROSS FIXED CAPITAL FORMATION, PUBLIC & PRIVATE SECTORS (YD million; current prices)

Public Sector Private Dev. Plan Other Total Sector Total GFCF

1969 0.3 0.3 0.7 1.0 1970 -- 0.3 0.3 0.7 1.0 1971 3.1 0.6 3.7 0.8 4.5 1972 7.8 1.1 8.9 0.7 9.6 1973 11.7 1.3 13.0 0.6 13.6 1974 18.6 1.5 20.1 1.0 21.0 1975 24.3 2.4 26.7 1.5 28.2 1976 39.2 3.0 42.2 1.8 44.0 1977 57.0 n.a. n.a. n.a. n.a.

Source: Statistical Appendix Table 2.5 and 5.8.

2.7 Public sector fixed investment expenditures outside the control of the development plans have been insignificant -- being largely in the form of capital expenditures on building and establishment by provincial Gover- norates and municipalities. Private sector investment expenditures are largely confined to private housing constructed by remittances of Yemeni workers abroad for the use of their families in PDRY.

Growth of National Income and Composition of Domestic Expenditures

2.8 National Income. Available national income data indicate that after the initial drop in domestic income of about 20-30 percent experienced after independence (discussed in Chapter I) and a subsequent period of relatively slow growth between 1969-72 (when the basic structural changes in the economy were undertaken) real growth of domestic product accelerated and averaged about 7 percent per annum in the period 1973-1977. Growth was particularly rapid during 1976 and 1977 as a result of an import led economic expansion made possible by substantial increases experienced in workers remittances and foreign assistance. In current prices GDP is estimated to have increased from YD 84 million in 1973 to YD 129 million in 1976 and an estimated YD 150 million in 1977. The most significant increases were experienced in livestock and fisheries production, construction, transport and communications, finance, commerce and Aden Port associated activites (after the opening of the Suez Canal). Agricultural crop production, however, remained stagnant and declines were actually experienced in the production of major crops (a phenomenon which appears in part due to the institutional changes which have taken place in the agricultural sector). Production of the Aden refinery also declined, as its owners till April 1977 -- British Petroleum -- found it economical to process their imported crude oil in more modern and efficient refineries located elsewhere. These sectoral developments are discussed further in Chapter III. - 13 -

2.9 Gross domestic product per capita is estimated to have increased from YD 53 ($154) in 1973 to YD 61 ($177) in 1975 and to an estimated YD 87 ($252) in 1977 -- current prices. Gross national product over the period increased much more rapidly as a result of the acceleration of workers' remittances. These increased to YD 39.8 million in 1976 and reached YD 61.9 million in 1977. Gross national product per capita accordingly increased from YD 59 ($171) in 1973 to YD 97 ($281) in 1976 and is estimated to have reached YD 117 ($339) in 1977. 1/ The increase in real per capita income was less spectacular but still very substantial; between 1973 and 1977 it is estimated to have grown by about 45 percent.

Table 2.3: SUMMARY OF NATIONAL ACCOUNTS (YD Million)

Est. 1973 1974 1975 1976 1977

Population (million) 1.59 1.60 1.64 1.68 1.73 GDP (current market prices) 84.2 97.6 99.9 128.9 150.3 (Agr. & Livestock) (12.3) (13.4) (13.9) (14.7) (n.a.) (Fisheries) ( 5.5) ( 5.5) ( 5.3) (12.1) (n.a.) (Aden Refinery) ( 4.7) (10.1) ( 2.2) ( 1.9) (n.a.) (Other Manufacturing) ( 4.3) ( 6.1) ( 8.0) (12.1) (n.a.) (Economic Services) (11.9) (15.6) (21.0) (27.1) (n.a.) (Financial Services) (23.2) (28.6) (31.4) (36.5) (n.a.) GDP constant 1974 prices 93.1 97.6 96.1 115.1 123.2 GNP (current market prices) 92.2 103.7 118.1 162.1 202.0 GNP constant 1974 prices 97.7 103.7 104.5 134.0 154.2 GDP/capita (YD current prices) 53.0 61.0 60.9 76.7 86.9 GDP/capita (YD constant 1974 prices) 58.6 61.0 58.6 68.5 71.2 GNP/capita (YD current prices) 58.0 64.8 72.0 96.5 116.8 GNP/capita (YD .onstant 1974 prices) 61.4 64.8 63.7 79.8 89.1

Source: Statistical Appendix Table 2.4 and Mission estimates.

2.10 Composition of Domestic Expenditures. The meagre resource base of the areas comprising PDRY, the centering of economic activity around the Port of Aden (including its role as a major military base) and the existence of an undeveloped and subsistence economy in the interior before 1967, resulted in

1/ Current prices; or an estimated $320 per capita according to the World Bank Atlas Methodology. - 14 - an economy which was mainly dependent on external resource transfers throughout the period of British rule. Public sector investment expenditures in this period were insubstantial (and centered around the creation of social infrastructure in Aden) and private sector investment (except for the Aden Refinery) was largely confined to residential and commercial buildings (also in Aden). The current expenditures of the State were largely on its bureaucratic apparatus, and provision of social services (particularly health and education) was minimal and confined to Aden. Private consumption expenditures were distinguished by their substantial disparities both with regard to their regional distribution (again largely Aden) and amongst social classes.

Table 2.4: COMPOSITION OF DOMESTIC EXPENDITURES, 1973-1977 (Percent)

Expenditure as Percentage of GDP /a Boositand Factor Service Fixed Changes Public Private NFS as Income, Net, Invest- in Consump- Consump- Percentage as Percentage Period ment Stocks tion tion Of GDP of GDP

1973 16 4 26 90 36 12 1974 22 24 26 81 53 12 1975 28 6 31 85 50 18 1976 34 5 30 82 51 26 1977 Est. 41 5 28 81 55 35

/a Excess of total expenditures over 100 percent equals the deficit in goods and non-factor services.

Source: Mission estimates.

2.11 Developments in the economy since 1967 have not lessened PDRY's dependence on external resource transfers. What is significant, however, is the changes in their origin (more than half is now contributed by Yemeni workers abroad, the rest being foreign assistance) and the uses to which these transfers (together with domestic resources available) are put. The control of private consumption, while being made easier by more equal income distribution and emphasis on national simplicity, has been remarkable particularly since workers' remittances accrue as income to private individuals and their disposition is difficult to regulate without cutting off the incentive to remit. Public consumption expenditures, which experienced drastic cuts in earlier years (Chapter I), are increasing. However, salaries of public servants (reduced twice in the last decade) are low and the main increase has been on recurrent expenditures involved with the extension of social services areas in the country. The most impressive change, however, has - 15 - been the stepping up of investment expenditures. Fixed investment expenditures are estimated to have increased to 41 percent of GDP (31 percent in GNP) in 1977.

2.12 Military expenditures have remained relatively high (fluctuating around 10 percent of GNP since 1969/70), but are an item on which the Govern- ment has clearly exercised great restraint. In relative terms defense spending has substantially declined from 49 percent of the total public expenditures in FY69/70 to about 22 percent in FY76 and 19 percent in 1977. In comparison, development expenditures accounted for about 56 percent of total spending in 1977. It should also be noted that in PDRY the Armed Forces (based on draft) participate when required in certain areas of economic activity including public works projects, harvesting of crops, and the impart- ing of educational and technical skills.

Table 2.5: DEFENSE EXPENDITURES

(YD million, current prices)

Defense as a Dev. Exp. as Total Public Defense % of Total Development % of Total Expenditure Expenditure Public Expenditure Public (YD Million) (YD Million) Expenditure (YD Million) Expenditure

FY69/70 16.8 8.2 48.8 7.6 9.5 FY73/74 35.0 10.4 29.7 12.1 34.6 FY76 78.4 17.1 21.9 39.2 50.1 FY77 101.4 18.9 18.6 57.0 56.2

Source: Statistical Appendix and previous IBRD reports.

The Public Finances

2.13 As discussed earlier (Chapter I) PDRY's public finances at independence were dependent in large measure upon British budgetary support. Their withdrawal necessitated severe austerity measures by the Government. Efforts to mobilize domestic resources included the imposition of a steeply progressive special tax on non-government employee incomes which had to be paid in addition to the normal income tax, the ending of Aden's status as a free port by the imposition of customs duties and the introduction of new excise and corporate taxes. Despite these measures, PDRY was unable to eliminate the gap in its current budgetary accounts and this had to be bridged by foreign assistance and borrowing from the banking system. This situation still continues today although both current revenues and current expenditures have increased markedly and the domestic resource mobilization effort is fairly substantial (20 percent of GNP in 1977). There is, however, considerable additional potential to raise further resources (both through taxation and through increasing the efficiency/surpluses of public enterprises). - 16 -

Table 2.6: FINANCING PUBLIC EXPENDITURES (YD million, current prices)

Borrowing Total Domes- Re- Banking Public (Inv. tic Re- source Foreign System, Spending Exp.) sources Gap Aid etc.

1969/70-70/71 35.6 ( 0.6) 27.1 8.5 5.6 3.2 1971/72-1973/74 97.8 (25.1) 51.2 46.6 25.9 20.7 1974/75-1977 272.8 (136.0) 113.3 159.5 99.6 59.9 (1974/75) (48.3) (20.7) (23.9) (24.4) (12.8) (11.6) (1975, Apr.-Dec.) (44.7) (19.1) (17.3) (27.4) (14.9) (12.5) (1976) (78.4) (39.2) (32.0) (46.4) (28.4) (18.0) (1977) (101.4) (57.0) (40.1) (61.3) (43.5) (17.8)

Source: Statistical Table 5.2 for 1974/75-78; earlier data from previous IBRD Report on PDRY (Report No. 1231a-YDR).

2.14 The PDRY's public finances are highly centralized and, except for the minor expenditures by municipalities, controlled entirely by the Central Government. Fiscal operations are conducted through two budgets (Current and Development) and the operations of special funds (e.g., the Price Stabili- zation Fund, the Agricultural Development Funds, Martyr's Fund, etc.). The net effect of the operation of the special funds is not substantial as far as mobilization of resources for development is concerned (their net contribution to the Government finances is estimated to be currently about YD 1 million per annum -- Statistical Appendix Table 5.2).

2.15 Domestic Resource Mobilization. Total resources mobilized by PDRY's fiscal system (excluding the resources of special funds but including public sector self-financing) were estimated at YD 40.1 million in 1977 or about 20 percent of GNP. The inclusion of the receipts of special funds would increase this by 2-4 percent. This is fairly impressive performance by a country with a low per capita income (about $320 in 1977). There is still scope, however, for mobilizing additional domestic resources - particularly through increasing the surpluses of the public economic sector which dominates all economic activity in the country. The table below (which includes all aspects of public enterprise resource transfers including contributions to the Stabili- zation Fund) indicates its level to be currently about 7 percent of GNP and on a declining trend. Current tax revenues could also be increased somewhat by raising the level of custom duties (which are relatively low) but the overall potential for mobilizing additional resources through further taxation is limited (paragraph 2.16 below). - 17 -

Table 2.7: GOVERNMENT RESOURCE MOBILIZATION (YD million)

Annual Annual Annual Average Average Average 1969/70- 1971/72- 1974/75- 70/71 73/74 1977 1976 1977

Total Resources /1 13.6 17.1 30.2 32.0 40.1 Current Revenues 12.6 14.8 24.5 25.6 33.1 Development Revenues - 1.3 3.7 4.6 5.2 'Public Sector Self. Fin. 1.0 1.0 2.0 1.8 1.8

Memo Contribution by Public Sector Entities 2.3 4.0 11.2 13.4 14.8

Total Resources/GNP n.a. n.a. 21.1 19.8 19.8 Public Sector Res./GNP n.a. n.a. 7.8 8.3 7.3

/1 Excludes operations of Special Funds.

Source: Statistical Appendix Table 5.3 for 1974/75-1977 and World Bank Report 1231a-YDR for earlier years.

2.16 Current Revenues. Current Government revenues accrue largely from corporate income taxes, customs duties and excises, public sector entities profit transfers 1/ and "departmental" revenues (largely rents from nationalized properties). Receipts from income tax (personally earned) and taxes on wages and salaries are insubstantial because of the tight ceilings imposed on domestically earned personal incomes. Income receipts from abroad, on the other hand, remain untaxed. Whilst this is potentially a lucrative source of government revenue, 2/ the Government is disinclined to move in this direction for fear of discouraging workers' remittances. Other than a defense tax (3% of salary income) and 5% contribution to the pension fund there are no social security or other contributions, payroll taxes, property taxes or general sales taxes.

1/ Law No. 11 of 1973 governs the disposition of surplus of public enterprises. Public enterprises making profits pay corporate income tax (37.5%) and a payment to the Price Stabilization Fund (5% of corporate income tax). The remaining surplus is distributed as follows -- 25% to current Government revenues, 50% to the Development Fund and 25% to the enterprises general reserves.

2/ Even a nominal tax of 2% on incomes received as transfers from abroad (YD 62 million in 1977) would yield greater revenues than the government combined receipts from personal income taxes and taxes on wages and salaries (YD 1.2 million in 1977). - 18 -

2.17 The increases experienced in current revenue receipts in recent years (and particularly during 1977) have been largely the result of the substantially expanded volume of imports made possible by the increased level of workers' remittances and external assistance. Other important factors were increases in fishery exports and improved tax collection procedures. Receipts from customs duties now account for almost 33 percent of total current revenues although the level of custom duties is low. Excise revenues have also increased, reflecting the increase in volume of existing production as well as minor tax changes including somewhat wider tax coverage. However, excises on cigarettes and petroleum still account, respectively, for about 45 percent and 25 percent of total excises collected. More generally, PDRY's narrow production base severely limits the scope of possible additional taxation measures. Major increases in Government revenues in the future must therefore come from increasing the surpluses of public enterprises (discussed below).

Table 2.8: CURRENT GOVERNMENT REVENUES (YD thousand)

1969/70 1974/75 1976 1977

Direct taxes, of which 2,887 5,466 7,423 8,709 Corporate income taxes (1,605) (3,787) (5,569) (6,586) Personal income taxes /1 ( 169) ( 253) ( 191) ( 337)

Indirect taxes, of which 3,977 9,996 12,807 19,202 Custom duties (2,399) (5,691) (6,355) (11,045) Excise taxes ( 850) (3,200) (4,760) ( 6,217)

Other revenues, of which 4,255 3,754 5,410 5,152 Public sector entities Transfers to operational budgets (1,201) (1,239) (2,400) (2,700)

TOTAL 11,119 19,216 25,640 33,063

/1 Excluding taxes on directly earned wages and salaries.

Source: Statistical Appendix Table 5.2 and IBRD Reports, 1231a-YDR.

2.18 Financial Performance of Public Enterprises. The financial performance of public enterprises although somewhat improved is still weak. There are currently approximately 60 public enterprises in PDRY which undertake the bulk of economic activity in the country. Of these, less than thirty made profits l/ (and therefore paid corporate income tax) in 1977. In fact, more

1/ The picture is made worse by the fact that the bulk of public corporations made only nominal allowances for depreciation in their accounts. - 19 - than 70 percent of the corporate income tax paid by public sector entities in 1977 (YD 5.8 million) was generatedby three finance and insurancecompanies (YD 2.2 million), three trade enterprises(YD 1.2 million) and the National Shipping Company (YD 0.6 million).

2.19 Whilst recognizingthat profits are an inadequatejudge of performance in any system where input and output prices are centrally controlled,the requirement for public sector surplusesto supplementcapital formationis imperativein most systems. The specific sphereswhere these surpluseshave to be generatedmust obviously remain the prerogativeof the Government. As a minimum rule, however, enterprises should be encouragedto set prices to recover costs (includingdepreciation); and subsidies (if required) should be granted at distributionlevels. In any case, there is a need for effective accounting systems to judge the efficiency of public enterprises. Whilst existing financialcontrol of public enterprises is cent-alized,it needs to be strengthened(most importantlyby introducinga uniform system of accounts). Institutionalizationof proper accountingprocedures and putting public enterpriseson a sound economic footing thereforeneed to be given high priority (see Annex I).

2.20 DevelopmentRevenues. The mobilizationof domestic and foreign resources for development(other than foreign project assistance,domestic Bank borrowing or self-financingby entities) is done through the.vehicle of the DevelopmentFund (held in the Bank of Yemen by the Ministry of Plan- ning). The domestic receipts of this Fund comprise 50 percent of net after tax profits of public corporations,"contributions" from salaries (Government servants in their first two years of employmentdo national service and the balance of their salaries beyond a token allowance is credited to the Fund); and transfers from Government (representingthe surpluseson the special funds discussed earlier). All external non-profit civilian assistance received by the PDRY is also credited to the Fund. - 20 -

Table 2.9: DEVELOPMENT FUND, RECEIPTS AND EXPENDITURES (YD million)

Cumulative Annual Average 1974/75-77 11 1974/75-77L

External Receipts 58.9 16.8 Grants (cash & commodity) ( 0.6) ( 0.2) Commodity loans ( 6.7) ( 1.9) Cash loans (45.6) (13.0)

Domestic Receipts 16.0 4.6 50% of PE's Net Profit (11.4) ( 3.3) Contributions from Gov't. salaries ( 2.4) ( 0.7) Transfers from Gov't /2 ( 2.2) ( 0.6)

Total Receipts 74.9 21.4 Total Expenditures 76.8 21.9

/1 Till September 1977. 75 Surpluses from Special Funds.

Source: Statistical Appendix, Table 5.7.

2.21 The Development Fund has been initiated into PDRY's planning mechanisms in order to cushion the great volatility in foreign assistance experienced by the PDRY in its first planning period 1971/72-73/74 (paragraph 2.5). It also, in the Government view, safeguards resources primarily intended for national development. During 1974/75-77 (the only period for which details of the operations of the Fund are available), total expenditures from the Fund (YD 76.8 million) were in line with total receipts (YD 74.9 million). External receipts accounted for almost 80 percent (YD 58.9 million) of total resources mobilised by the Fund.

The Balance of Payments

2.22 A review of PDRY's balance of payments situation reveals three significant developments over the past decade. First, the imbalance on commodity trade has continued (commodity exports still cover only about 8-10 percent of commodity imports). This was perhaps inevitable given PDRY's meagre resource base, PDRY's increased development needs and the increase in the international prices of all major imports (including foodstuffs and petroleum). Second, service receipts (primarily workers' remittances but also Aden Port associated receipts) have grown rapidly and imparted considerable strength to PDRY's foreign finances. Thus, PDRY's total foreign exchange earnings now allow the country not only to import - 21 - minimum subsistence requirements (as was the case in the late sixties and early seventies) but also to import a significant amount of capital goods required for development. Third, an increasing amount of external assistance has become available to PDRY. (Official assistance amounted to $69 million in 1977, in addition, PDRY received official grants of $55 million). An important implication of the above developments is that PDRY's balance of payments is vulnerable without receipts from workers' remittances. On the other hand if these can be strengthened and sustained, PDRY can use these resources (together with external assistance) to accelerate the pace of economic growth. Workers' remittances also hold out the prospect to PDRY to be increasingly self-sufficient in its external-financial operations (Chapter V).

Table 2.10: SUMMARY BALANCE OF PAYMENTS ($ million)

1969 1973 1975 1976 1977

Domestic Exports, f.o.b. 8 14 8 26 29 Retained Imports, c.i.f. -87 -120 -165 -267 -324 Trade Deficit -79 -106 -157 -241 -295 Invisibles, net 80 54 76 145 205 Workers' Remittances 57 33 56 115 180 Others, net 23 21 20 30 25 Balance on Goods and Services 1 -52 -81 -95 -90

Official Transfers 1 .. 10 46 55 Official M & LT Capital, net 5 25 31 58 68 Gross Disbursement 5 25 32 60 69 Repayments .. .. -1 -2 -1 Miscellaneous Capital, net -13 23 16 -21 7 Overall Balance -6 -4 -24 -13 40

Memo Item Net Foreign Assets (67) (74) (15) ( 2) ( 42)

Source: Bank of Yemen.

2.23 Institutional Changes. The free port and private trade activities prevalent in the pre-independence period throughout PDRY have now been replaced by strict state control. 1/ All commodity imports for domestic consumption and indigenous exports are planned and the transactions conducted largely through public companies. Public sector agencies are responsible for about 90 percent of total commodity trade transactions. There are about two hundred registered private traders but their activities are confined to import of

1/ However, a free trade area has been established in the Aden Harbor for entreport activities by both public companies and private individuals. - 22 - minor consumer goods (spices, sweets, household utensils, mats, etc.) and exports of some traditional commodities (hides and skins, etc.).

2.24 Commodity Trade Accounts. Commodity export performance has been mixed. There have been substantial gains in fish exports. In addition, significant royalty payments are also made by the Nishiro Fishing Company (discussed in the following section on the services accounts). On the other hand the major agricultural commodity export, cotton, has levelled off, in part as a result of the increased domestic consumption requirements of a newly installed textile factory. For the future there is unlikely to be any substantial commodity export growth other than in the fisheries sector. Commodity imports, on the other hand, have grown significantly compared to the earlier post-independence period. 1/ An important feature has been the continued high level of food imports occasioned by the stagnation of PDRY's agricultural crop sector. The Government's strategy is still, however, to try to aim for self-sufficiency in fruits and vegetables a.,d supply 60-70 percent of the country's foodgrain requirements by the end of the next plan period (1983). The Government's industrialization program with its emphasis on import substitution (mainly food processing, textiles and construction materials) should also ease PDRY's import requirements in the future although overall import requirements for both intermediate and capital goods will continue to grow with the development of the economy.

Table 2.11: COMMODITY TRADE T$ million)

1969 1973 1975 1976 1977

Commodity Exports 8 14 8 26 29 Fish ( 1) ( 5) ( 5) (12) (17) Cotton ( 5) ( 6) ( 1) (10) ( 4) Others (3) ( 3) (2) ( 4) (8)

Commodity Imports -87 -120 -165 -267 -324 Food (-37) (-46) (-62) (-61) (-75) Petroleum ( -4) ( -9) (-20) (-52) (-58) Others (-46) (-65) (-83) (-154) (-191)

Deficit -79 -106 -157 -241 -295

Source: Central Bank of Yemen and Mission estimates.

1/ The present volume of commodity imports may still, however, not have reached total import volumes experienced in the periods before independence. The latter of course was in large part to meet the needs of the colonial administration, British base, and a large re-export trade whilst the composition of present day imports is heavily oriented to the development needs of the economy. - 23 -

2.25 The Services Accounts. The substantialpositive balances on the services accounts are primarily determinedby the level of workers' remittances (althoughthe resumptionof activity in Aden Port and the operationsof the Aden Refinery are also becoming important). The decline in confidenceof Yemenis abroad during the "transitionto socialism"period (1971-73)resulted in a sharp drop in these remittances. PDRY authoritiessince then have undertaken a series of policy actions designed to restore confidence and encourage remittances. The most important factor of course has been the apparent accep- tance of the new socialistorder and the restorationof settled conditionsin the country. Incentives for workers' remittancesnow in force include convertible foreign exchange accounts, preferentialinterest rates, duty-free allowancesfor personal accompaniedimports, and permission to build private housing for family use. A new investmentlaw is also under consideration. Taken together,the prospects are for workers' remittancesto continue to increase at least for some time. Whilst PDRY's labor force abroad of about one hundred thousand is relativelyyoung (70 percent less than 34 years old -- see Chapter IV) the prohibitionof new emigration after 1973, if continued, would inevitablymean a levellingoff (and finally a decline) of workers' remittanceover the next two decades.

Table 2.12: SERVICES RECEIPTS AND PAYMENTS ($ million)

1969 1973 1975 1976 1977

Service Receipts 89 63 89 162 237 Workers' Remittances (57) (33) (56) (115) (180) Aden Refinery (11) (11) (12) ( 11) ( 13) Nishiro Co. ( 3) ( 2) ( 7) ( 8) Others (incl. Aden Port) (21) (16) (19) ( 29) ( 36)

Service Payments 9 9 13 17 34 (PDRY/USSRJoint Venture) (..) ( 2) ( 2) ( 1) ( 3) (Others, incl. Gov't.) ( 9) ( 7) (11) ( 16) ( 31)

Services,Net 80 54 76 145 203

Source: Mission estimates.

2.26 Aden Port activitiesare also becoming increasinglyimportant. 1/ Whilst these have not recovered to their level of the mid-60's (before the closure of the Suez Canal) foreign exchange revenues are increasing. These

1/ See Chapter III for a more comprehensiveaccount of the developmentof the Aden Port and Refinery. - 24 - accrue mainly from bunkering activities (including the supply of fuels, provisions and service) and the operations of the Free Trade Zone. Earnings from bunkers are substantial but have considerable scope for further expansion -- since the major companies involved with these operations import almost half of their fuel supplies instead of purchasing it from the Aden Refinery (Statistical Appendix, Tables 10.2 and 10.3). This is for a variety of reasons discussed in Chapter III. The movement of goods in the free-trade zone is also increasing (10,000 tons valued at $18 million in 1976 -- Statistical Appendix, Table 10.4). Taken together, the current foreign exchange earnings of Aden Port are estimated at between $15-20 million.

2.27 The Aden Refinery 1/ could also contribute to PDRY's foreign exchange earnings in the future. Previously (i.e. till April 1977) foreign exchange receipts were solely the result of local cash expenditures of the refinery and tax payments to Government (Statistical Appendix, Table 9.6). As a result of the acquisition of the refinery all foreign exchange receipts are now accruing to the Government. The refinery is now processing crude under contract ($1/barrel) and its production of 1.8 million tons in 1977 contributed an estimated $13 million in foreign exchange (gross earnings). Total installed refinery capacity is 8.5 million tons. Bringing production to this level will, however, require substantial additional investments and arrangements to secure much larger crude supplies.

2.28 External Assistance. Total disbursed external assistance to PDRY in the period 1969-77 is estimated cumulatively at about $250 million in MLT loans (two-thirds from Socialist countries) and $113 million in grants. The latter are a comparatively new feature of PDRY's external finances. These started in 1975 and have originated mostly from Arab countries.

2.29 The bulk of official development assistance made available to PDRY in earlier years originated from Socialist countries and from United Nations aid agencies. The USSR was principally involved in the agricultural sector (irrigation works, establishment of state farms) and fisheries (particularly processing). Chinese assistance was initially concentrated on highway construction (the Aden-Mukalla coastal highway) and subsequently in industry (textiles) and provision of hospital facilities. Other socialist countries (German Democratic Republic, Czechoslovakia, Bulgaria) contributed to a variety of development projects. The United Nations, recognizing PDRY as one of the world's twenty least developed countries, contributed assistance through its specialized agencies and also through its World Food Program.

2.30 More recently, however, Arab countries, Arab Development Funds and multilateral aid agencies have joined PDRY's development efforts and emerged as the most significant current aid donors to PDRY. Of the $432 million of total MLT commitments outstanding at end 1977 $221 million were from these

1/ See Chapter III for a more comprehensive account of the development of the Aden Port and Refinery. - 25 - countriesand institutions(including $38 million from IDA). The addition of grant assistance ($113 million) has made their role even more prominent. Major sectors in which countries and agencies are involvednow include agriculture, fisheries,ports, highways and health and education.

2.31 External Indebtedness. The heavy inflow of foreign resourceshas inevitablyled to a rapid accumulationof PDRY's external public debt even though part of the aid was given in grant form. Total debt outstanding includingundisbursed as of end 1977 amounted to $432 million, of which $241 million was disbursed. Bilateral sources account for almost 80 percent of total external debt, with Arab Governmentsand Funds providingthe bulk ($125 million), followed by USSR ($97 million), China (US$60million), and other (largely Socialist)countries (US$57 million). Multinationalaid came from the Arab Fund ($55 million) and IDA ($38 million). The combined terms of these loans are concessionarywith an average weighted interest rate of 1.5 percent, grace period of 6 years, and maturity of 24 years, giving a grant element of more than 60 percent. These soft terms and the recent nature of PDRY's external debt have resulted in relativelysmall service obligationsso far. Debt service payments in 1977 were only $1.5 million, about 0.6 percent of total exports of goods and services (including workers' remittances). However, PDRY's debt service obligationsare projected to increase steadily in future years. - 26 -

CHAPTER III

AN ASSESSMENT OF SECTOR DEVELOPMENT

Sectoral Performance - An Overview

3.1 All major sectors were profoundly affected by the socialization of the economy. The largest traditional sector, agriculture, underwent the greatest structural change. It is not surprising, therefore, that despite substantial investments in agricultural infrastructure, there are indications that production of some major crops has declined. On the other hand, the fisheries sector has grown fairly rapidly largely because of the activities of a modern fishing fleet. Socialization has also been comparatively easier in other--relatively modern--sectors of the economy. The industrial sector (excluding the Aden Refinery) has grown fairly rapidly (15 percent annually between 1973-76). Transport, communications and commerce, after recov,ering from the depression brought about by the closure of the Suez Canal and withdrawal of the British presence, have also shown impressive growth (12 and 7 percent annual growth respectively). The growth of the Government sector (direct central Government employee activity) was inevitably rapid in the period 1969-72 (about 8 percent in real terms) but has slowed down subsequently. The effect of these developments on the structure of the economy are summarized below.

Table 3.1: STRUCTURE AND GROWTH OF DOMESTIC PRODUCTION

Annual Growth (%), Domestic Value Added (%) 1973 Prices 1969 1973 1976 1969-72 1973-76

Agriculture 16 16 13 - 2 (Plant) (9) (11) (7) (-) (-4) (Livestock) (7) (5) (6) (-) (15) Fisheries 4 6 10 5 8 (Domestic & Joint Co) (4) (4) (5) (5) (7) (Foreign Co) (.) (2) (5) (-) (19) Manufacturing 26 10 8 -10 -2 (Refining) (22) (5) (.) (-10) (-16) (Other) (4) (5) (8) (1) (15) Transport. & Comm. 7 8 12 -2 12 Commerce 24 17 17 -5 7 Other Sectors 23 43 40 5 5 (Government) (8) (25) (19) (8) (4) Total 100 100 100 - 7

Source: Statistical Appendix, IBRD Reports and Mission estimates. - 27 -

Agriculture

3.2 Resource Base. PDRY's agricultural resource base is meagre, limited both by soil suitability and scarcity of water. Average cropped area currently amounts to only about 122,000 acres spread over twelve 'wadis'. Grazing lands, whilst substantial, are sparse in vegetation and water-holes are located at considerable distances (sometimes as far as 40 miles) from each other. The country, however, has been traditionally predominately rural - a situation which continues today. Almost 70 percent of the country's population (1.7 million in 1977) live in rural areas or as bedouins, and the sector provides direct employment to about 170,000 persons (43 percent of the labor force).

3.3 Agricultural Structure. Structurally, the agriculture sector now comprises 35 state farms with a total area of about 30,000 acres (of which 18,000 acres is actually cropped) and about 3,000 permanent workers; 44 production cooperatives with 214,000 acres of land (about 100,000 acres is cropped) and 30,000 members; and a very small number of private farmers in remote areas. State farms function on a straight forward state-ownership basis with workers receiving fixed wages. Cooperative farms are presently either "production sharing" cooperatives with collective production and distribution of income; or 'service sharing' types with individuals working their own separate holdings and paying fees for collective inputs and services e.g. use of water, pesticides, equipment, etc. The Government however, plans to turn all individual landholding type cooperatives into 'production sharing' cooperatives by the end of the next Plan period (1983). A further key element in the economic restructuring has been the nationalization of all agricultural product supplies, marketing and processing concerns. Private ownership of livestock is, however, allowed and livestock, small ruminants and poultry are maintained by almost every rural household and by bedouins who produce the bulk of the country's output of meat products (marketing of surplus has to be conducted through the appropriate public corporations). The state's involve- ment in livestock production is still relatively small (a few small dairy and sheep farms) except in the poultry sector where a large complex has been established with Cuban assistance.

3.4 Investment Policies. PDRY has devoted a considerable proportion of its investment resources to the development of the re-organized agricultural sector. Thus total investment in the agricultural sector between 1971/72 to 1977 is estimated at YD 34.9 million or 22 percent of the country's entire development expenditures. The bulk of these investments have been used for 'horizontal' expansion--60 percent of the total has been spent on provision of irrigation facilities (mainly the drilling of wells and wadi spate diversion works and canals). The remainder has been spent on establishing and equipping Machine Rental Stations for use by cooperatives, establishment and improvement of state farms and comprehensive 'wadi' development programs. Investments in the livestock sector have been largely for the development of the poultry complex and state livestock farms. There was also a relatively small (in terms of investment inputs) but vital program undertaken in cooperation with the United Nations to aid bedouin livestock activities centering around the development of watering points and provision of improved animal health facilities. - 28 -

3.5 Agricultural Plant Output and Productivity. Despite these substantial investments made in the agricultural sector, the value of PDRY's total plant output appears to have grown only slowly throughout the period 1973- 1976, and is presently likely to be below the levels experienced in the late sixties. Reliable indicators for an extended period are available for only five field crops (Table 3.2 below), which--with the exception of coffee--all show a declining trend in production. The drop in cotton production is attributable to a significant decline in the area available for cultivation--some land was being levelled etc. while another significant proportion was shifted to the production of sorghum and wheat. On the other hand all indications are that area under grain crops increased but sharp productivity declines were experienced. The drop in their aggregate production partly offset the apparently more favorable results obtained in the production of fruits and vegetables (the PCMFV reports an increase in local produce marketed - Statistical Appendix Table 7.9).

Table 3.2: AGRICULTURAL PRODUCTION

1969/70 1972/73 1973/74 1974/75 1975/76 1976/77

Quantity of Production ('000 Tons) Cotton 12.8 13.2 10.3 10.8 9.3 4.9 Sesame 3.4 3.4 1.2 2.0 1.7 2.9 Coffee 0.8 0.8 0.8 0.8 0.8 0.8 Tobacco 1.4 1.4 1.2 1.2 1.2 1.2 Wheat 12.0 12.5 9.0 10.0 10.0 9.1

Source: Ministry of Agriculture for 1969/70 and 1972/73 data, and the Central Statistical Organization for data relating to 1973/74-1976/77.

3.6 Livestock Production. The value of total animal production on the other hand appears to have increased substantially during 1973-76 (gross value of production is reported at YD 5.3 million in 1973 and YD 9.6 million in 1976). This increase can be only partially attributable to the Government poultry complex (1976 production YD 0.5 million) or the limited number of livestock (3,900 cattle; 5,250 sheep and goats) on state farms. The resur- gence of animal production appears to be largely due to cyclical recovery, after drought, of the herds of bedouins (who rear roughly 30-40 percent of the country's cattle and small ruminants) and of rural households. It is also possible that animal population in rural areas were depleted during the period of agrarian reform and are now being restored.

3.7 Future Potential of the Agricultural Sector and Policy Issues. PDRY currently imports all its rice, sugar and tea requirements, 75 percent of its wheat requirements, 70 percent of its edible oils, 50 percent of its maize, 45 percent of its meat products, and certain other agricultural products (mainly vegetable) at a cost of about YD 22-25 million annually. The next plan (1979-83) is expected to aim for self-sufficiency in vegetable production - 29 - and attaining60-70 percent self-sufficiencyin foodgrains. The present irrigated land area is capable of achieving these targets only if substantial productivityincreases can be achieved.

3.8 The major issues in the agriculturalsector center primarily around increasingproductivity in agriculturalcrop production and increasingeffi- ciency of marketing institutions. Several factors influence agricultural productivityin the PDRY including (i) difficultiesin adapting to the new agrarian structuresof cooperativeand state farms; (ii) low efficiencyof labor, particularlyon state farms; (iii) inconsistentpricing policies; (iv) central imposition of cropping patterns; (v) inadequateinputs; and (vi) inefficientmarket mechanisms.

3.9 Both cooperativeand state farms are not operating at anticipated output levels in part due to difficultiesin adapting to these new institutions but also because of inadequacyof incentivemechanisms and deficiencies in decision-makingand management. 'Service-sharing'cooperatives--where individualwork is rewarded more than in communal production--appearto be the most efficient of the existing institutions. Productivityproblems here appear generally due to inefficiencyof overall management (which provides communal inputs) and the general effect of sector pricing and output policies (discussedbelow). 'Production-sharing'cooperatives show less efficiency because of the lack of close relationshipbetween individualeffort and income. State-farms,which have been establishedon the best lands, also suffer from serious productivityproblems. An FAO study discovered that workers on state farms--whoare considered Government employees and are paid minimum wages--workless than 4 hours/day. The Government is trying to cope with this problem by introducinga system of 'pay accordingto output', initiallyon one state farm. More generally, work productivitynorms are being developed. While these should help improve the condition of state farms, the policy of the Government with regard to cooperativesis much more ambiguous. It is currentlyplanned that all 'service-sharing'cooperatives be turned into 'productionsharing' cooperativesby 1982--a policy move which could further reduce productivityin the sector.

3.10 The structure of farmgate prices prevalent in the agriculturesector also do not appear to be geared to maximizing efficiency. Preliminaryexer- cises by the economic mission indicate inconsistenciesin pricing policies-- with the return to labor inputs varying as much as 100 percent between crops. The central impositionof plan targets and cropping patterns has also imposed rigidities and compounded the problems emerging from centrally fixed farm prices. The overall result has been insufficientor inadequateproduction of certain crops. An IDA financed agriculturalprices/subsidies study (currently under implementation)should provide the basis for correctionsin price relationships.

3.11 The provision on farm inputs such as improved seeds, fertilizerand pesticides,is still inadequate. These shortagestogether with insufficient experience in the use of modern farm inputs, seriously constrain agricultural production. Marketing inefficiencieshave also influencedagricultural productivity in PDRY. Wasteful handling and heavy storage losses characterize the marketing system and need to be remedied. - 30 -

Fisheries

3.12 The PDRY's coastline comprises one of the very productive fishing areas in the world and the Government has shown considerable pragmatism in developing this sector. Agencies/entities involved in production comprise domestic small-scale fishermen organized into cooperatives, the public sector, a joint Soviet-Yemeni fishing venture and the Japanese Nichiro Company. The gross value of fish production in 1976 was estimated at YD 15.6 million which was significantly greater than the value of production of the plant agricultural sector or the livestock sector. Total production and exports have experienced rapid growth. The volume of total production increased from 107 thousand tons in 1969 to 153 thousand tons in 1976. Exports have increased from YD 0.5 million (or 16 percent of commodity exports) in 1969 to YD 4.0 million (or 46 percent of commodity exports) in 1976 and an estimated YD 5.9 million (59 percent of commodity exports) in 1977. Additional paymentoswere received from Nichiro which operates on a royalty basis--ti:ese amounted to about YD 1.3 million in 1973 and about YD 2.6 million in 1976. /I /2 Table 3.3: PRODUCTION- AND TRADE OF FISH-

1969 1972 1976 1977

Production (000 tons) 107.3 125.0 153.2 162.1 Exports (000 tons) 11.4 18.4 23.0 28.5 Exports (000 YD) 543.1 2,090.2 4,030.0 5,867.0 Imports (000 tons) 1.7 2.6 Imports (000 YD) 81.3 185.5

/1 Fresh weight. /2 Excluding Nichiro.

Source: Ministry of Fish Wealth.

3.13 Fishery Resources. Despite impressive overall performance, the sector has so far only developed a part of its full potential. It is roughly estimated that less than one-third of the sustainable yield of fishery resources is presently utilized. Estimates of the minimum sustainable annual yield (MSY) of all fish types with economic value range between 425-650 thousand tons (or three to four times the catch of 1976). The pelagic (surface-associated) fish are the most abundant and are found largely off the remote Fifth and Sixth governorates. The sardine is the most important pelagic specie for which the most reliable estimate of MSY is 400,000 tons (the 1976 catch was 88,000 tons). Tuna, presently the second most important pelagic specie, has an estimated MSY of 15,000 tons (1976 catch - 6,500 tons). The potential annual yield of demersal (bottom) species is estimated at between 50-90 thousand tons (1976 catch about 15,000 tons), largley located off the sixth governorate. The most dominant invertebrate specie available off PDRY is cuttlefish (estimated MSY 10 thousand tons--the specie appears to have been over-fished in 1976). Other crustacean species include the rock lobster - 31 -

(estimated MSY 45-90 tons of taiLs) and the spiny lobsters (estimated MSY 200-300 tons of tails)--which appear to be fished to economic limits--and squids (MSY 500 tons), shrimp and green turtles which are not yet fully exploited.

3.14 Fisheries Structure. X,tthe time of the "corrective movement" (June, 1969) the entire fish catch was undertaken by some 13,000 private fishermen (largely spread in primitive villages along the coast) who were controlled and organized by chiefs and fish merchants. Government policy has since resulted in significant structural changes. Now the PDRY fishing sector comprises: (i) about 7,000 small-scale fishermen who are organized into 14 cooperatives and are responsible for the fish production aimed at meeting domestic consumption requirements; (ii) a large-scale fleet managed by the Ministry of Fish Wealth producing largely for export; (iii) a joint PDRY/Soviet fishing venture also for export; and (iv) fishing activities (largely for cuttlefish) which are undertaken by the Japanese Nichiro Company on a royalty basis.

Table 3.4: THE STRUCTURE OF FISHERIES PRODUCTION (Value in Mn. YD, Market prices, Volume in '000 Tons)

1973 1976 Value of Volume of Value of Volume of Produc- Produc- Produc- Produc- tion (%) tion (%) tion (%) tion (%)

Fisheries 3.6 (51) 123 (91) 4.1 (27) 136 (80) Cooperatives M.F.W. Fleet -- (--) -- (--) 2.4 (16) 15 (9) Joint Venture 0.7 (10) 3 (2) 1.6 (9) 3 (2) PDRY/USSR Nichiro 2.8 (39) 9 (7) 7.5 (49) 15 (9) Company (Japan) Total 7.2 100 135 100 15.6 100 169 100

Source: Ministry of Planning.

3.15 Government Policies and Investments. Government policy in the fisheries' sector has been guided by 3 objectives: (i) to "socialize" the previously traditional fishery sector; (ii) to distribute the catch of this sector efficiently throughout the country in order to increase domestic consumption of fish and thereby also simultaneously reduce some of the food import needs of the country; and (iii) to increase PDRY's meager foreign exchange earnings as rapidly as possible by building up its own modern fishing fleet; and to the extent this fleet was not capable of utilizing the fisheries' potential of PDRY, use foreign companies to catch at least the more profitable fish available in PDRY's waters. The practical results of this policy have been a fairly substantial investment program (about YD 22.8 million or 14 percent of the total investment in the period 1971-77) which has been primarily spent upon the acquisition of the modern fishing fleet, building up of associated shore facilities, (primarily a large fishery harbor near Mukalla at - 32 -

Khalf), and the construction of a distribution network (centering around the building of cold storages) across the country. Some processing facilities (largely fish meal production and two fish canneries) have also been developed.

Table 3.5: PUBLIC INVESTMENT IN FISHERIES SECTOR (YD Million)

1971 1972 1973 1974 1975 1976 1977

Fisheries Sector 0.2 0.4 0.9 2.6 3.6 8.4 6.5 Total Investment Program 3.1 7.8 11.7 18.6 24.3 39.2 56.9 Fisheries Inv. as % of Total Inv. 7% 5% 8% 14% 15% 21% 11%

Source: Ministry of Planning.

3.16 The fishing cooperatives (and therefore the small-scale fishermen) have not been the direct beneficiaries of any substantial capital investments 1/. Their needs are clearly identifiable. These involve (i) the provision of minor harbour facilities where conditions permit e.g. Nishtun, Khor Umeria, or Bir Ali or Qishn - these sites would then constitute "fishery centers" for the neighboring areas; (ii) the construction of receiving stations (with very basic cold storage facilities) at the other fishing villages to be serviced by the 'fishery centers' above; and (iii) the supply of new fishing vessels to augment the vessel strength of the cooperatives as well as to replace aged and unserviceable vessels 2/.

3.17 Internal Marketing and Processing Facilities. Almost all internal marketing of fish is conducted through the co-operatives by an Internal Mar- keting Organization in the Ministry of Fish Wealth (except in the remoter regions of the Fifth and Sixth Governorates where marketing is undertaken by the co-operatives themselves). The efficiency of the procurement system for the village fishermen is presently a direct function of their accessibility by road since collection by sea is almost non-existent. Thus the fishing villages in the vicinity of the 600 km Aden-Mukalla road can increasingly sell their fish "wet". Beyond Mukalla to the Oman border (the 600 km coastline of the Fifth and Sixth Governorate) the bulk of the cooperative's catch-- which comprises 90 percent of the sardine catch (about 80,000 tons), 80 percent of the shark catch (about 2,500 tons) and about 20 percent of the assorted fish catch (about 9,000 tons) of the entire PDRY--is salted and dried

1/ Except for two minor receiving stations constructed at Qusayer (Danida) and Shihr (IDA); and the provision of about 60 motorized sambuks (IDA).

2/ For example, it has been estimated that 90 percent of the existing craft in the cooperatives in the Sixth Governorate are more than 10 years old. Their efficient life is generally estimated at 5 years. This is likely to be representative of the other governorates. - 33 - on beaches and then taken on foot and camel to the nearest cooperative head office from where it is collected by the Ministry of Fish Wealth. The only fresh fish procured in these areas by the Ministry of Fish Weatlh is lobster and shrimp.

3.18 Fish processing facilities, comprising fish-meal production plants and a minor canning facility, are still in the process of being rationalized. Total fish-meal capacity (existing and ordered) is about 1,180 tons/day (431,000 tons per annum) located at Aden (35 tons/day, USSR origin), Mukalla (150 tons/day, USSR origin), Mukalla harbour (500 tons/day, used floating plant from Mozambique of Norwegian origin supplied by the Abu Dhabi Fund), and on order (500 tons/day, German, financed by the Kuwait and Arab Funds). The capacity of the Government purse-seiner fleet is still inadequate to service these plants--production was less than 10,000 tons during 1976, and although the fleet has since been enlarged, is unlikely to have exceeded 20,000 tons in 1977. As a result the floating fish-meal plant operates at a fraction of its capacity incurring sizeable losses whilst the other fish-meal plants lie closed. It is now intended to move the new 500 ton/day plant at Mukalla to a site west of Aden. This, together with an augmented purse-seiner fleet and the mobilization of a good portion of the cooperative catch should result in better capacity utilization. No additional fish-meal plants are envisaged and even the level of presently procured capacity is likely to exceed significantly the country's future requirements.

3.19 Potential of the Fisheries Sector and Relevant Policy Issues. Fisheries in PDRY appear to have a potential comparable to that of the agricultural sector. The Government's policy of focusing a relatively high percentage of the total investment resources to the fisheries sector is therefore well founded and should be sustained. It would be worthwhile, however, to give more emphasis to internal improvement in handling and processing and working towards upgrading quality and processing for higher value. Fish-meal production should perhaps be discouraged, not increased, and the sardines utilized in a better way as frozen or canned for human consumption.

3.20 The fishing cooperative as an institution offers the greatest potential in the short-term for rapid development in the fisheries sector. There is an urgent need to upgrade fisheries cooperatives, both by appropriate capital investments as discussed earlier and also by involving them more in processing and marketing operations. An appropriate first step may well be to transfer fishery receiving stations (i.e. coastal cold storage facilities) to the cooperatives concerned. In addition appropriate policies should be formulated to: (i) attract competent people as cooperative managers; (ii) extend more credit to cooperatives; (iii) improve social infrastructure including schools and medical care units; and (iv) provide extension services to cooperatives (no extension services are given at present).

3.21 With regard to foreign fishery operations, the Government feels that such companies should be directed to the exploitation of fish not yet exploited. This would mean increasingly redirecting their operations to migratory fish such as the tuna, and gradually transferring exploitation of crustacean species (cuttlefish and lobster) to indigenous fishing operations. - 34 -

In order to accomplish this effectively,it may be important for PDRY to seek technical assistance and also secure marketing contracts from major commercial organizationsinvolved in these activities.

Manufacturingand Mineral Resources

3.22 Resource Base. PDRY minerals base has not been fully explored and no significantmineral deposits 1/ have yet been identifiedother than lime- stone and clay deposits (suitable for cement) and silica (for glass production). PDRY's industrialstrategy has thereforebeen focused largely on agro-based industries (textiles,vegetable and grain processing, leather products and fish processing)and certain import substitutingindustries (plastic products, tools, paints, soft drinks etc.). Cement and glass industries are proposed to be establishedin the future. The large Aden Refinery (recentlyacquired by the Government from British Petroleum) is based entirely on imported crude.

3.23 InstitutionalStructures and Performance. The sector currently comprises the Aden Refinery (1,800 workers), the textile factory (1,300 workers), about 30-40 smaller factories (3,000-4,000workers) and a large number of very small private establishments(tailoring, bakeries, repair shops etc. which provide employment to about 13,000 workers). Government policy has focused around developing the manufacturingcapabilities of the public sector. Total investment in industry is estimated at YD 5.4 million or 22 percent of total public investment in the Three Year Plan (1971/72-1973/74) and YD 17.7 million (or 13 percent of total investment)during the first four years (1974/75-1977)of the current Five Year Plan. Major public factories establishedby these investmentsinclude the textile factory (capacity7.2 million yds/annum),a flour mill (capacity56 thousand tons), a tomato paste factory (4.4 million cans), dairy products factory (4 million liters) etc. The wholly privatelyowned sector comprises about 12 factory-sizedunits (which are either old units or started before the promulgationof the Invest- ment Law in 1971) and small scale establishments. The private sector has been encouragedto join the public sector in "mixed sector" factories--and as a result, this sector has grown substantially. There are currentlyeight 'mixed'industrial establishments employing about 700 workers.

1/ Some quantitiesof titanium, iron ore and copper have been found--but not enough to justify large scale commercial exploitation. Offshore drilling near Socotra for oil by a Canadian firm indicatedthe presence of significantquantities of gas but no oil. - 35 -

Table 3.6: STRUCTURE OF INDUSTRIAL PRODUCTION (Gross value of production; YD million, current prices)

1973 1976 Value % Value %

Public 889 6 7,625 28 'Mixed' 1,070 7 6,341 24 Private 7,947 52 10,299 38 (Factory-Sized Units) (n.a.) (n.a.) (1,363)/1 (5) Aden Refinery 5,500 35 2,500 9 Total 15,406 100 26,765 100

/1 1977 production value.

Source: Ministry of Planning.

3.24 Manufacturing Sector Potential and Policy Issues. The future development of PDRY's non-refinery manufacturing sector will in large part depend upon the Government's encouragement of 'mixed' enterprises. The reasons for this stem from the small size of PDRY's economy (and corresponding markets), and the likelihood that the limited number of obvious large scale investment fields (cement, glass, canning etc.) will soon be exhausted. Thus economically viable industrial investment will have to be increasingly in small import-substituting manufacturing establishments and service (machine repair) industries which the Government is unlikely to have the management resources to run efficiently. On the other hand, there are a large number of potential investors (particularly Yemeni workers and traders abroad) who would be willing to join the Government increasingly in mixed enterprises provided that appropriate guarantees were forthcoming from the Government. The PDRY authorities are cognizant of this situation, and it is understood that a new investment law is under preparation. As a further step the Government is planning to establish an industrial estate (with technical assistance from UNIDO) to organize such investment once appropriate legislation has been enacted. Skilled manpower constraints faced by the industrial sector are expected to be tackled increasingly through the establishment of technical training institutes.

Aden Refinery

3.25 Background. The Aden Refinery (capacity 8.5 million tons using the hydro-skimming process 1/) was established in 1954 by British Petroleum

1/ The older "hydro-skimming" refinery process produces largely fuel oil (50 percent) with high and middle distillates being about 25 percent respectively of total output. The more modern "hydro-cracking" processes produce on average 40 percent high distillates, 30 percent middle distillates and fuel oil residual of about 30 percent. - 36 -

(BP) at a cost of L 55 million for processing crude oil from the Gulf. How- ever, the combined effects of the closure of the Suez Canal in 1967 and the standardization of more efficient refining processes gradually led BP to shift refining operations previously carried out at Aden to its other refineries located primarily in Europe. Total refinery production under BP dropped steadily from about 6.2 million long tons in 1969 to about 1.6 million long tons in 1976 (the last full year under BP ownership). Benefits to PDRY from the refineries comprised of the local cash outlays of the Aden Refinery (about $12 million per annum in convertible currencies including a minimum tax payment to the Government of $1.7 million); and the provision of employment to about 1,800 people. The refinery was finally transferred to PDRY by mutual consent in May 1977. Compensation was paid only for moveable assets (worth less than $10 million) since the refinery had been fully depreciated on BP's books. BP also agreed to stay on as technical advisors (with a staff of about 42 expatriates) for a period of two years.

Table 3.7: OPERATIONS OF ADEN REFINERY

(Millions of long tons)

1969 1973 1976 1977

Refinery Operations Imports of Crude 6.5 3.1 1.7 1.8 Production 6.2 2.8 1.6 1.8 Exports 5.6 2.7 1.5 1.7 (Bunkers) (n.a.) (n.a.) (n.a.) (0.4) Supply for Domestic Consumption 0.1 0.1 0.1 0.1 Memorandum Items Total Port Bunkering 0.6 0.4 0.6 0.7 Total Domestic Consumption 0.3 0.4 0.4 0.4

Source: Statistical Appendix Tables 9.5, 10.3.

3.26 Current Operations. The refinery under PDRY ownership has retained the levels of throughput processed in the last two years (1.7-1.8 million tons/annum). However, largely because of the marketing problems involved, the refinery is currently not engaged in any production or export on its own account but is processing crude for foreign countries at a fee of $1/ barrel (which at the rate of production of 1.8 million tons would give it gross foreign exchange earnings of $13.1 million per annum). Existing contracts include processing of 1 million tons for Saudi Arabia, 0.5 million tons each for Libya and Kuwait, and 0.4 million tons for the USSR.

3.27 Refinery Potential and Issues. Running the refinery profitably will be a considerable challenge. Break-even capacity is estimated at 3.4 million tons, and PDRY is hoping to secure sufficient contracts particularly from - 37 - neighboring Arab countries to process this amount of crude. This level of output will also enable the refinery to meet PDRY's domestic requirements of petroleum products (PDRY's present consumption needs center around the higher distillates, e.g. petroleum, which the Aden Refinery produces in lower quantities). On the other hand, the refinery needs substantial investments to enable it to runction more efficiently. These include a deep-sea SMB (single mooring buoy) for enabling the refinery to use larger crude carriers which cannot come into the Refinery harbour; the erection of new desulpherization units (some of the older ones are unusable); larger crude storage facilities (if possible doubling the present storage capacity of 0.25 million tons); and liquid petroleum gas storage and processing units (most of it is currently flared).

3.28 An interesting aspects of the PDRY oil scene is that almost half (300-400 thousand tons) of fuel and diesel oils are imported by the foreign companies operating in Aden Port rather than purchased from the local refinery. The reasons for this include the inability of the Aden Refinery to offer attractive prices and the unwillingness of the larger international companies to use other than their own sources of refined products. Given the complexities of the international bunkering trade, PDRY has not interfered on this account with the oil companies (who have only recently rehabilitated their bunkering facilities after reopening of the Suez Canal).

Transport and Communications

3.29 Appreciating that national integration and economic and social development would be crucially affected by the establishment of an appropriate communications network, the PDRY has concentrated a significant portion of its investment resources (about YD 46 million or 28 percent of total plan investment for the period 1971/72-1977) to the development of this sector. In 1967, except for the privileged position of Aden, the country consisted of isolated communities connected only by unpaved tracks, air services using unpaved airstrips, and minor coastal shipping facilities linking Aden and Mukalla (through traditional dhows). By 1977 PDRY had constructed an additional 1/ 500 km of paved roads (of which about 460 km completed the Aden-Mukalla link and the bulk of the remainder connected Aden with Taiz), developed several thousand kilometers of cobble, gravel and earth roads, upgraded seven local airports, and built a secondary lighterage port at Mukalla. The building up of associated transport services comprised the establishment of Yemen Bus Company, The Public Corporation for Land Transport, Alyemda (the national airline) and the National Shipping Corporation. All these services are publicly owned and the state now operates all transportatidn in the country except for private lorries (operating under strict supervision including distributrion of loads), some private taxis in Aden and private cars. 2/

1/ PDRY had 470 km of paved roads in 1967, mostly in and around Aden.

2/ The import of private cars without an import license is discouraged by a special tax of 300 percent (proceeds of which are credited to the Stabilization Fund). - 38 -

3.30 Road Construction. PDRY's first major road project, the Aden-Mukalla road (kms 158-620),was constructedwith the help of the Chinese Government who provided (in addition to financing)the design, equipment and management down to the foreman level. This experience has provided a nucleus of trained workers who are spread between the other major roads currentlybeing constructed (viz. Mukalla-WadiHadramaunt financed by IDA/Kuwait Fund, Aden-Taiz modernizationfinanced by the Arab Fund and the Government-financedShukera- Ahwar and Sayhut-Nishtunroads). All road constructionin PDRY is undertaken by the public sector.

3.31 Issues in the TransportationSector. The PDRY has already spent (through 1977) about YD 46 million on developmentof transportationfacilities. Ongoing projects (above) and new projects about to be started (Ash Shihr-Sayhut and Naqab-Nisab-Beihan)will cost another YD 50 million (1978 prices). These substantialinvestments should provide the basic transportationinfrastructure considerednecessary for PDRY. It appears to be now importantto shift the focus of developmentin this sector towards maintenance of infrastructureand balancing of various transportationmodes (through augmentationof fleet and appropriatepricing policies). The fiscal implicationsof this also need to be carefully examined.

Aden Port

3.32 The Aden Port is one of PDRY's greatest assets. It has one of the finest natural harbours in the region, and until the closure of the Suez Canal, was the fourth largest bunkering port (after London, Liverpool and Rotterdam). Substantialeconomic benefits (includingtourist activities of transiting passengers)accrued from this traffic. The closure of the Suez Canal radically altered all this. By 1973 the number of ships calling at Aden were less than 25 percent of their previous level and bunkering activities dropped by 90 percent. However, the re-opening of the Canal (June 1975) restored prospects for Aden Port. Accordingly,Aden Port facilitieswere refurbishedat a cost of about $18 million (almost entirely in foreign exchange) financed by IDA and AFESD.

3.33 Today, both the number of ships calling at Aden harbour and bunkering activitieshave almost doubled from their pre-1975 level which correspondingly increasedforeign exchange earnings (see Chapter II). Whilst this has been a welcome development,recovery of traffic has been slower than anticipated. It was expected that about 40 percent 1/ of ships transiting Suez would stop in Aden. The actual present (1977) level is about 13 percent. Further, whilst the rate of increase of ships through the Canal is increasing,bunkering traffic at Aden appears to have levelled off (the increase in bunkers delivered between 1976 and 1977 was only 3 percent). Dry cargo operationsof the Port have, however, expanded rapidly. This primarily reflect PDRY's own increased import needs and the use of Aden as an entrepot for Yemen Arabic Republic because of congestionat Hodeida Port. Total dry cargo imports in 1977

1/ "Appraisalof Aden Port Rehabilitation",World Bank Report No. 761a. YDR, August 1975. - 39 - amounted to 618 thousand tons (of which about 100,000 tons were for YAR). Free zone activitiesat Aden Port are also becoming substantial(Statistical Appendix Table 10.4).

Table 3.8: ACTIVITY IN ADEN PORT (ThousandLong Tons)

1966 1969 1973 1976 1977

Number of Ships 6,246 1,568 1,320 2,336 2,605 Net Registered Tonnnage 31,425 8,089 5,565 9,944 10,738 Dry Cargo Imported 647 406 312 387 618 Dry Cargo Exported 184 99 65 80 79 Oil Imports 8,072 6,068 3,342 1,779 1,811 Oil Exports 3,985 5,584 2,724 1,311 1,294 Oil Bunkers 3,486 387 388 638 658 Transit Passengers 146,300 2,519

Source: Appendix Table 10.1 and YPSC for 1966 and 1969 data.

3.34 A major reason for lack of increase of Aden Port's bunkering activities is the changed pattern of world shipping (includingtheir fuel capaci- ties) and competitionfor bunkering from neighboringports (particularly Jeddah). In addition,whilst the major (foreign)bunkering firms located at Aden have recently refurbishedtheir equipment,Aden still lacks very high volume refueling facilities. Their installationwould probablymake Aden more attractive for bunkering operations. The Government is also trying t.omaximize its foreignexchange earnings from Aden Port through the provisionof ship servicing facilities. Thus a floating dry dock (12 thousand tons lifting capacity)has recently been purchased from Japan and is currently fully booked for the next year. Berthing facilitiesfor ship unloadingcargo are also under constructionsince the present operationscarried out by lighters are deemed to be stretched to their limits. Prospectsare, therefore,that whilst Aden Port is unlikely to recover to its pre-1967 level of activities, it will continue to serve as an increasinglyvital asset of the PDRY and earn substantialamounts of foreign exchange for the economy. - 40 -

CHAPTER IV

AN ASSESSMENT OF SOCIAL DEVELOPMENT

4.1 Social problems identified by the PDRY authorities (i.e. the NLF) soon after independence (i.e. 1967-68) included (i) income inequalities primarily due to the unequal ownership of assets and monopoly over financial and commercial activities; (ii) rural poverty prevalent throughout the hinterland outside Aden but particulary prominent in the nomadic population of the Northern areas; (iii) urban poverty accentuated by unemployment in Aden; (iv) inadequate access to basic foodstuffs and consequental malnutri- tion amongst the majority of the population; (v) inadequate health facilities including the virtual non-existence of either curative or preventive medical systems outside Aden; (vi) illiteracy and lack of education facilities; and (vii) shortages of housing in Aden (despite the substantial capacity left in place after the evacuation of the British) and very limited existence of appropriate structures in the rest of the country.

4.2 The last decade has seen vigorous action by the Government on the above issues. A preliminary review indicates that the issue of income distribution in the urban areas has been substantially resolved through redistribution of assets and control over all major economic activity by the state. However, the continued prevalence of low incomes in the large cooperatives sector remains as a considerable cause for concern for PDRY policy-makers. This in fact is the most challenging area where the problems associated with increasing productivity of socialist institutions have to be tackled. Open unemployment is no longer a problem, although disguised unemployment in the rural areas (including workers in low produtivity occupations) may be substantial and may in part be responsible for manpower shortages being experienced in other sectors of the economy. Basic food supplies are readily available and are affordable in the urban areas. How- ever, there are indications that food consumption in the rural areas may be less than adequate. Substantial progress has also been made in the education and health sectors - particularly in meeting basic needs. The challenges facing these sectors are to upgrade facilities and meet specialized needs. Overall, one of the major problems facing PDRY today is the removal of urban/ rural disparities. Rural poverty is prevalent throughout the agricultural and fishery areas - in part because of low productivity in agriculture and in part because of the dispersion of the population (particularly the bedouin) over vast and inaccessible areas. It now appears that the Government feels that a viable solution to this problem may be in redistributing and resettling 1/ the rural population into 22 fishery centers and 54 agricultural centers. All these developments in the social sectors are discussed in greater detail below.

1/ "Needs Assessment for Population Assistance to the PDRY", UNFPA, New York, April 1978; pp. 33-34. - 41 -

Income Distribution

4.3 Redistribution of Assets. All substantial fixed assets in PDRY are publicly owned except some small private factories and some minor service and retail establishments. Monopolization of financial and commercial activities by the state has eliminated virtually all private trading or "comprador" activity. Whilst this virtually "pure" socialist system has existed until now, the situation has been given a new dimension by the growing inflow of workers remittances which accrue to private individuals. The Government feels that this "national capital" must have a constructive outlet and therefore changes are being contemplated in the Investment Law of 1971 to allow this. The Government also feels that the existing taxation laws discussed in the next paragraph will adequately take care of any substantial disparities in disposable income that may emerge.

4.4 Wage/Salary and Taxation Systems. The Government which employs about 150,000 people either directly or indirectly (i.e. about 38 percent of the country's labor force) has reduced salaries twice (1968, 1972) on a progressive scale. Subsequently, there has been only small general increase (5 percent) in 1975. The maximum-minimum differential has been reduced from 11:1 before 1967 to 3.5:1 prevalent today. Incomes of individuals (outside the Government sector) are taxed twice, first by a steeply progressive Special Tax (which rises to 37.5 percent on incomes above YD 900 per annum and 47.5 percent on incomes above YD 2,400 per annum), and any balance remaining is subject to the national Income Tax (which itself is also substantially progressive) after subtracting the amount of Special Tax paid and deductions allowed. The resulting income distribution (on domestically earned income) is probably one of the most egalitarian in the world today.

Regional Disparities

4.5 As mentioned earlier (Chapter I) the hinterland of the PDRY outside Aden was very backward at independence and the bulk of the people lived in absolute poverty. Since then the development of the communication network has eased the delivery of basic needs (food, health and education). However, even after ten years of reasonably rapid development, the bulk of the population still lacks adequate shelter and associated facilities (water, sewage, electricity) and may also in many cases be unable to meet basic food requirements. A large part of the problem is due to the inadequate productivity (and consequent low incomes) in the agricultural sector. The agriculture and fisheries sectors employ about 180,000 people (45 percent of the labor force), and average income per worker in agriculture and fisheries (YD 74 in 1976) was less than half of the average for the nation and substantially less than the average of about YD 250 prevalent in the non-agricultural sector (Statistical Appendix Table 1.4). Most families in the rural areas, therefore, manage to survive only because more than one member of the family works (56,000 women-- about half of them bedouins--work in the rural areas 1!) and because members of their family (or relations) are abroad and supplement family incomes by workers' remittances.

1/ Working rural women comprise about 30 percent of the agricultural labor force. - 42 -

4.6 The problem of rural poverty is particularly acute in the Northern areas of the PDRY inhabited by bedouins. This nomadic population currently comprises about 177,000 people or about 10 percent of the population of the country (Statistical Appendix Table 1.2). A socio-economic survey 1/ undertaken in 1973 in the vast areas inhabited by these peoples (the northern areas of the Fourth, Fifth and Sixth governorates - an area about 1,100 km long and about 160 km wide) indicated that the bulk of bedouins lived in the most deprived conditions. Shelter in most cases (90 percent) comprised of caves in the mountains, the remainder lived in huts or tents. Literacy was less than 2 percent. Education and health facilities were virtually non-existent. Lack of water for both animal and human consumption was described as the most pressing problem. Permanent waterholes were generally not available; those that existed were sometimes as far as 100 km apart -- a fact which had resulted in the decimation of their herds during the drought of 1970-73. 2/ The Government has since (with the aid of the United Nations) embarked upon a program of drilling deep boreholes of water. Thirty of these are now in operation. 3/ Some community development centers have also been established and 30,000 school-age bedouin children have been placed in boarding schools (see section on education). The development of these areas, however, still remains a major problem.

4.7 Scheme for Population Resettlement. Whilst the situation of the bedouin is the most dramatic, the inadequacy of social facilities (except the fundamental needs of food, health and education which are now generally provided--see sections below) is repeated in large measure throughout the approximately 3,600 "Tabehs" (hamlets) which house the bulk of the rural population engaged in agriculture and fisheries occupations. The Government now feels that perhaps the only way to attain a decisive breakthrough in this field is through a massive program of resettling the population into 54 agricultural centers and 22 fisheries centers (provided with appropriate facilities including housing, water, sanitation, electricity, transportation etc.). This strategy for rural developent was first articulated to an UNFPA mission which visited PDRY in December 1977. Their report to the Government, 4/ while cautiously supporting this strategy, points out that it would be very difficult to embark successfully upon the entire project given both the financial costs (the initial requirements would be for 5,000 housing units in the fisheries sector and 17,000 housing units in the agricultural sector plus associated infrastructure) and social problems likely to be encountered (including the reluctance of people to move from traditional living area). It recommends, instead, that a pilot demonstration project incorporating a few selected settlements of farmers and fishermen in appropriate locations be established and has offered to assist the Government in this effort.

1/ "Socio-Economic Conditions in the Northern Areas", UNDP Report, 1974 (Project No. SD/0971).

2/ The maximum distance a goat can be away from water during drought is 32 km.

3/ 45 boreholes would reduce the distance between them to 64 km, 90 would reduce it to 32 km.

4/ "Needs Assessment for Population Assistance to the PDRY", op. cit. - 43 -

Employment and Emigration

4.8 Open unemployment, severe in 1967, has now virtually disappeared as a result of Government employment policies (including a rapid intake into the government sector) and migration abroad. In fact it now appears (given emerging manpower deficiencies in certain key sectors including construction) that manpower shortages may soon constitute as a major constraint to the economic and social development of the country. It is therefore of particular interest that about 50 percent of the manpower potential of the country is not in the active labor market (Table 4.1 below). A portion of these obviously constitute of students (above the age of 12) and those incapable of work. The bulk, however, comprise of women not in the labor force and also men who are likely to be recipients of incomes from abroad (workers remittances). This situation is partly due to social tradition (despite the efforts made by the Government to socially emancipate women - paragraph 4.11 below) and partially to the economic incentive system existent in PDRY today. Urban women are unlikely to have any special incentive to seek work because of adequate family incomes resulting from earnings from the male members of the family. Rural women work only when forced by adverse family circumstances. Certain families (including male members) may not work at all because of income from family members abroad.

Table 4.1: POPULATION, MANPOWER AND LABOR FORCE (in thousands)

1969 1973 1976

Total Population 1,486 1,712 1,805 of which less than 12 years old 575 648 713 over 65 years old 54 62 67 migrants (adults and children) 70 122 125 Working Age Population 787 880 900 of which incapables 68 80 88 Manpower Potential 719 800 812 of which unemployed, but 408 441 396 not seeking jobs Total Labor Force 311 359 416 of which unemployed 47 36 17

Source: Statistical Apendix Table 1.2 and mission estimates for PDRY migrants abroad.

4.9 The issue of migrants abroad has several important aspects. First, whilst emigration has been prohibited since the end of 1973, the situation still is that one out of every three able-bodied men in PDRY (age groups 15-34) is estimated to be away from the country. Second, although the economic conditions in PDRY have improved to some extent, emigration would resume at a larger scale if permitted because of the substantial wages and salaries that Yemenis can obtain in the neighboring oil-producing countries. Third, - 44 - shortages of labor are increasingly beginning to delay the implementation of projects in all sectors, particularly construction. Fourth, because of PDRY's special circumstances, very few of the migrants are likely to return home while still in working age condition and thus the country will not benefit from the skills that the workers are acquiring abroad. Fifth, there are important direct costs that PDRY is incurring on behalf of workers abroad e.g. the Government is supplying families of emigrants with free education and medical care. Sixth, the flow of workers' remittances has eased the foreign exchange constraint and increased PDRY's import capacity. Whilst the ramifica- tions of the above issues are complex, there is no doubt that the Government should attempt to maximize the remittances from Yemenis working abroad and use these for various productive purposes (discussed earlier).

4.10 The provision of minimum wages (with their important consequences towards meeting basic needs, particularly foodstuffs--discussed below) and security of urban employment have been important achievements of PDRY's socialist system. On the other hand significant problems in securing productivity increases are beginning to emerge. Thus in the State farms, for example, it was noted that State farm workers (who are Government employees) were only working effectively for 3-4 hours/day. Subsequently the Government introduced a system of "payment according to production" on two selected State farms. More generally, the Government is experimenting with a system of bonuses and "qualification" payments (sometimes up to 50 percent of salary). However, it appears necessary that the Government embark upon a comprehensive scheme (adapted to each individual situation) to secure productivity increases in this public sector oriented system.

4.11 An important social and economic development has been the importance given to the emancipation of women in this hitherto traditional country. A comprehensive law (1974) has accorded legal equality to women (including equal pay to men, maternity leave with full pay, prohibition of marriage before completion of primary school education, prohibition of unilateral divorce, aboli- tion of the dowry system, etc.). In addition the Government has actively encouraged women to work (in addition to traditional family labor in rural areas). Women now constitute about 20 percent of the nation's work force, and their participation in social, community, personal and Government sources is increasing. Thus the female work force in factory-size manufacturing was 2,000 (or almost one-third of total employment in that sector) in 1976. Given PDRY emerging labor shortages (paragraph 4.8) women are likely to play an increasingly important role in the economic life of the country.

Food and Nutrition

4.12 The delivery mechanisms of essential goods (including foodstuffs) to consumers are either state-owned or state controlled. All "essential goods" have about 6 percent mark-up and are sold at (the same) fixed prices at all retail outlets throughout the country (the Government absorbing transportation costs to all consumption centers). There is no official food rationing (except for sugar where the ration is 3 lb per person per month); however, retail outlets (particularly the cooperative or public sector stores through which essential foodstuffs are marketed) keep an unofficial check on - 45 - quantities of food purchased. On the national level, a "Supreme Committee for Supply" chaired by the Prime Minister meets monthly to review the supply situation of essential foodstuffs throughout the country.

4.13 Price Stabilization Fund. This was established in July 1974 (with an independent budget) with the principal objective of stabilizing the prices of essential food commodities namely, wheat, flour, rice, sugar, milk powder, ghee and cooking oil. Prices of these food items have remained unchanged throughout the period July 1974 to date (June 1978). In 1977, tea was added to the list of commodities to be supported by the Fund. More recently, the Government has used the Fund to subsidize other commodities such as canned tomato products. Subsidized food is effectively "rationed" (as discussed earlier) and available to each person in limited quantities only.

4.14 The Cost of the Average Food Basket (at 1977 Prices) was calculated by the mission to be about YD 39.9 per capita (adult consumption) per annum in the urban areas and YD 26.7 in the rural areas. Details of these estima- tions are presented in Statistical Appendix Table 12.2. The lower estimate corresponds fairly closely with the results of a social survey by ECWA in 1976 1/ which reported average monthly cost of food per household (5.4 persons including 3 children) at YD 9.5 compared to monthly average income of YD 20 (the survey was conducted for slum dwellers living in uncontrolled housing). Given the current minimum wage of YD 20 per month in the public sector it appears that food consumption in the urban areas is satisfactory. It is much less clear that with agricultural or rural family incomes ranging between YD 74-148 per annum (1976) or YD 6.12 per month, the entire food needs of the population are being met.

Table 4.2: ESTIMATED FOOD SUPPLIES PER CAPITA

1969 1973 1977

Calories Per day 2,145 2,064 1,963 Caloric Intake as % of Req. /1 98 94 90 Per Capita Protein Intake (gms/day) 53 55 56 (Animal Protein) (16) (16) (18) Protein Intake as % of Req. /2 88 92 93 (Animal Protein as % of Req.T 162 164 177

/1 Caloric intake requirements estimated at 2,200 for PDRY.

/2 Minimum allowance is considered to be 60 grams of total protein per day, and 20 grams of animal and pulse protein of which 10 grams should be animal protein.

Source: Statistical Appendix Table 12.1.

1/ "Social Survey of Uncontrolled Urban Settlements in Democratic Yemen", Social and Human Development Division, ECWA, Beirut, 1976. - 46 -

4.15 FAO estimates of food supplies per capita indicate that per capita caloric intake has actually declined over the period 1969-1977. While these estimates (based on FAO data on gross estimates of imports, local production, change in stocks, etc.) are subject to a wide margin of error; they do indicate a tigthening in food consumption. In addition,the United Nations is currently transferringabout 6,000 tons of basic foodstuffsunder the World Food Program to PDRY as emergency relief. The overall food picture therefore appears to reinforce the need for improved agriculturalproduction and associated increase in rural incomes.

Health

4.16 Free health services in PDRY are considered to be a right which is recognizedby the Constitution(1970). 1/ However, given the poor health infra- structureprevalent in the country this constitutionalguarantee was for some- time no more than an intentionof Government policy. Subsequently,however, the Governmenthas rapidly expanded its health sources (see Table 4.3 below) and also abolishedthe practice of private medicine. 2/

Table 4.3: MAJOR HEALTH INDICATORS

1970 1973 1977

Hospital Beds 1,278 1,818 2,219 (pop. p/hosp. bed) (1,108) (875) (810) Physicians 71 136 222 (pop. p/physician) (19,944) (11,691) (8,095) Nurses 444 1,362 (pop. p/nurse) (3,204) (1,321) Average Life Expectancy at birth (years) 42.3 44.8 46.0 Infant death rate (1,000) 114 Crude death rate (1,000) 24.4 20.6 Current expendituresYD/capita 0.5 0.6 1.4 Capital expendituresYD/capita - 0.1 0.4

Source: StatisticalAppendix Tables 12.12-14.

4.17 The Government'sefforts in the health field have been significant. Available data indicate that in 1977 there were 222 physicians in PDRY (13 physicians for every 100,000 residents), as compared to 71 in 1970. Modern

1/ Article 41 of the Constitutionof the PDRY states "Medical care is the right of each citizen, the Government guarantees this right ... through expansion of free health services".

2/ Private clinics were abolished by Law No. 17 of August 30, 1973. - 47 - health institutionsinclude 26 hosptials with 2,219 beds, 17 health centers with 335 beds and 263 health units. Preventivemedicine departmentshave been provided in all "Muhafazat" (governorates). Despite strict limitationon resources, a prevention program against cholera, smallpox and malaria has been carried out fairly efficiently.

4.18 Despite these efforts to lay down an infrastructurefor health facilities,health conditions in PDRY remain poor. The life expectancyat birth is still only 46 years; crude death rate is about 21 per 1,000; and the rate of child mortality is high (114 per 1,000). Many widespread diseases (e.g. tuberculosis,typhoid, bilharzia) have yet to be controlled. Most of the health facilities in PDRY are ill-equippedand lack qualified staff and financialresources. Total expenditureson health, including expendituresfor equipment,buildings and operationof health facilities, through trebled in nominal value during the fiscal years 1971/72 to 1977, are still low and made up about 1.7 percent of GNP in 1977, as compared to 2.5 percent for all LDCs.

Education

4.19 The Yemeni Governmenthas always regarded the developmentof education arndtraining resources as a major goal of its developmentefforts. The urgency has been reflected in a very significantexpansion of the education system, particularlyat the primary level and illiteracyprograms. During the period 1966/67 to 1976/77, total enrollment in all levels of formal and technicaleducation have grown at an annual rate of about 15 percent, from 64,502 to 263,920. In 1976/77, one out of every seven residentsin PDRY was a student. The'Government'scommitments are apparent from its substantial expendituresin the sector. Total expenditureson educationduring the fiscal years 1973/74-1977,amounted to about YD 35 million equivalentto 7.4 percent of GDP as compared to an average of 4.4 percent for all less developed countries'GDP in the mid-seventies. - 48 -

Table 4.4: BASIC EDUCATION SECTOR DATA

1966/67 1973/74 1976/77

Literacy Rate 18 27 32 Primary School Enrollment (Gr. 1-6) 49,928 183,744 206,358 As a % of Age Group 7-12 /1 (n.a.) (n.a.) (89%) Lower Secondary School Enrollment (Cr. 7-9) 11,582 23,240 43,410 As a % of Age Group 13-15 /1 (n.a.) (n.a.) (32%) Upper Secondary School Enrollment (Gr. 10-12) 3,012 6,933 10,946 As a % of Age Group 16-18 /1 (n.a.) (n.a.) (11%) Higher Education Enrollment - 482 1,693 As a % of Age Group 18-22 (n.a.) (n.a.) (0.1%) Central Government Expenditures on Education n.a. 16.8% 16.1% recurrent As a % of Total Government n.a. 6.7% 5.8% capital Expenditure 10.1% 13.3% 10.4% total Central Government Expenditures on Eduation As a % of GDP n.a. 5.1% 6.3%

/1 Gross enrollment ratio including overaged pupils.

Source: World Bank estimates based on data provided by the Ministry of Educa- tion.

4.20 Primary Education. Total primary schools enrollment accounted for about 78 percent of total schools enrollment in PDRY in 1976/77; it increased at an annual rate of 15.3 percent during the post-independence decade, reaching 206,358 in 1976/77. Girls' enrollment during the same decade increased by 21.5 percent per annum and reached 71,531 in 1976/77. Nonetheless, girls' enrollment remains relatively small accounting for about 35 percent of total enrollment in 1976/77. This low level of female enrollment affected overall gross enrollment ratios adversely. In spite of this it stood at 89 percent in 1976 - a performance matched by very few Arab and Muslim countries (see Table 4.5). Table 4.5 PRIMARY EDUCATION: INCREASE IN CROSSENROLLMENT RATIOS AND IN DISPARITIES FOR FEMALE ENROLLMENT IN SELECTEDARAB AND MUSLIM COUNTRIES 1960-75

Iraq Yemen-PDR

a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Ia

Sya YAR BangladeshTuia ui Morocco < -Syrial

E Pakaistan Egypt Algeria uL /Afghanistan

Sudaa

Somaiia~~~~~~~~~~~~~~~~~~~~Miyi

*1~ ~ ~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~WrdBn 91

10 20 30 40 50 60 70 so 90 100 110 1:2D

Source:ducatin WorldDepartment,Gross Bank Enrollment Ratio at Primary Level {percent} Preliminary Analysis for "Meeting Basic Eclucational Needs," 1978. WrdBn-91 - 50 -

4.21 The Government is committed to achieving universal primary education by 1985. Social obstacles to girls' enrollment are being gradually eased and schools and classrooms are being built to provide every school age Yemeni access to education. However, in order to achieve universal education by 1985, PDRY must provide school facilities for an additonal 240,000 unity school-age children (age 7-14) of which, over 151,000 are girls. Should this target be achieved, girls' enrollment would grow at an annual rate of about 14.5 percent while that of boys at 4.7 percent.

4.22 Bedouin Schools. In its efforts to provide all Yemenis access to educational opportunities, the Government has established special schools with boarding facilities 1/ for the children of Bedouin. In 1976/77, there were 27 primary schools and 10 preparatory schools enrolling 27,572 students (of which 3,552 were girls) and 1,500 students respectively. The children of poor families who are not Bedouin will also be allowed to join these sehools in the future. In addition to following the curricula offered in formal education, Bedouin schools provide military education, pre-vocational training including agriculture, and some social activities.

4.23 Adult Education. Adult literacy has been a major Government objective and the Government has embarked upon an ambitious scheme to eradicate illiteracy. A Directorate General for Literacy and Adult Education was established in 1970. However, it was in December 1973 that the Government made the eradication of illiteracy a national goal and came up with a concrete program of action aimed at educating adults under 45 years of age. According to the 1973 Literacy Law, all of the economically active population between the ages of 12 and 45 must attend a 9-month literacy program (8 hours per week) within the period 1974-79, and the entire adult population by 1982. As a result, the number of adult education classes increased from 318 in 1972/73 to 2,310 in 1976/77 while enrollment rose from 9,076 to 61,489 during the same period. For the period 1970/71 to 1976/77, 55,396 Yemenis were considered to have been 'liberated' from illiteracy (Table 12.10 of Statistical Appendix).

4.24 Various incentives are offered by the Government (including promotion and regarding for public servants) to encourage the attainment of adult literacy, and all establishments (factories, public corporations, etc.) have to hold compulsory literacy classes. More recently, a Government decree has now required that every job seeker should have at least eight years of schooling or should have passed a literacy examination.

4.25 Education Issues. The quantitative development of education in PDRY since independence has been extremely impressive. The next major goal which has to be attained is improvement in the quality of education facilities. These include upgrading school facilities (50 percent of school buildings are unsatisfactory, 75 percent of primary schools are without any furniture and educational aids are non-existent), improving the qualifications of teachers (68 percent of primary and lower secondary teachers are unqualified) and

1/ Food is currently being provided for these schools by the U.N. World Food Program. - 51 -

increasing educational efficiency (only 50 percent of those entering complete the course at the primary level and 33 percent at the secondary level). In addition steps have to be taken towards strengthening higher educational systems (presently the bulk of Yemenis receive higher education abroad - see Statistical Appendix Tables 12.8 and 12.9) and increasing technical training facilities (both in technical institutions and on-the-job training) to meet the shortages of skilled workers currently being experienced. If the current high level of financial expenditures on education (as percent of total expenditures) can be maintained, the achievement of the above objectives should be indeed possible.

Housing

4.26 PDRY authorities were faced during the initial years of independence with two major problems in the housing sector viz: (i) urban housing particularly in Aden) whilst being fairly substantial in stock, was unevenly distributed - at least as far as ownership was concerned; and (ii) the bulk of the population of PDRY living in the hinterland inhabited primitive shelters (with no supporting infrastructure). The Government sought to solve the first problems by nationalizing all housing units except owner-occupied dwellings. There does not appear to have been any widespread resultant changes in occu- pancy. The occupants of nationalized housing, therefore, became in effect tenants of the State, paying a reduced rent 1/ which has remained unchanged since 1972. The second problem, of creating new housing units in both urban and rural areas has proved more intractible, both because of the pressing need to spend limited investment resources in other sectors and also because of the substantial constraints on construction capacity which have recently emerged.

Table 4.6: ADEN HOUSING SITUATION

1972 1977

Housing Stock 69,750 70,864 (Public Nationalized Housing) (59,750) (59,750) (New Public Housing) (.) (814) (Private Dwellings) (10,000) (10,300) Uncontrolled' Settlements (huts) 7,000 12,000

Source: Mission estimates based on data from Ministry of Planning and the office of the Governor of Aden.

4.27 With regard to nationalized housing, the Government now finds there is a major problem in keeping the existing stock intact. Occupants have by and large let their structures run down - it is estimated that some 50 percent of nationalized houses/apartments are in serious disrepair. In order to avoid

1/ Rents were reduced 25 percent under the housing law. - 52 - this situation in the future the Government has decided to sell 1/ all new houses constructed by the public sector to private individuals through the mechanism of a revolving mortgage fund. It is now being considered that the 50 percent stock of nationalized housing still in good condition should be sold to the occupants under the same scheme.

4.28 The Government has also found itself unable to spare resources for investments in public housing. Statistical Appendix Table 12.15 indicates that only 1,270 housing units were constructed throughout PDRY by the public sector in the period 1973/74-1977 (of which 814 were in Aden). Total investment expenditures by the Government have averaged less than YD 1 million per year (0.7 percent of total public expenditures for the period). Private sector investment in housing so far has also been limited - being estimated to be less than YD 1 million per annum.

4.29 The low level of private investments in housing is surprising (despite the institutional environment) in view of the large sums of money being remitted by workers abroad and the provision being granted to them to build family structures for private use. It appears that the main reason responsible is the increasing labor shortages being experienced in the construction sector, shortage of construction materials and the low priority accorded to private housing (versus Government development projects or Government buildings) by executive authorities. During 1977 the Governor of the Fifth Governorate (which has a considerable emigrant population) stopped all work on private housing in order to achieve Government/public sector construction targets.

4.30 Given the above situation (including labor shortages in the construction sector) the housing problem confronting PDRY is not likely to be solved in the immediate future. The Government, however, hopes to speed up house construction through the institution of pre-fabricated housing. Accordingly, two such factories (one British with a capacity of 600 units/annum and the other Hungarian with a capacity of 1000 units/annum) have been ordered and are expected to start production towards the end of 1978.

1/ Under Law No. 20 of 1976 "Concerning the Conveyance of Houses," individuals who own housing cannot sell or rent such houses (other than to temporary lodgers if they have to go abroad for a period not exceeding three years). At death of owner, the house is transferred automatically to the deceased's family. - 53 -

CHAPTER V

POSSIBLE DIRECTIONS OF FUTURE POLICY AND DEVELOPMENTPROSPECTS

Possible Directions of Future Policy

5.1 The socialistGovernment of PDRY has endeavouredfor a decade to extend public ownership and control over major sectors of the economy. However, whilst extension of public ownershiphas been largely accomplished, new and challengingproblems of increasingthe efficiency of public sector institutionshave become prominent. In response to these problems,various mechanisms for increasingproductivity and efficiency are being explored. Thus public sector institutionshave recently been instructed that their performancewill be judged by their productivity. Wage incentive systemshave been introducedand wage/outputnorms are being explored. In the field of agriculture,the Governmenthas embarked upon a study of prices, subsidy and incentivesystems in an effort to improve output and productivity. The Government also feels that PDRY's socialist system has now gained enough strength to allow and even encourage additionalprivate ownership in certain selected sectors. Thus newly constructedpublic housing is being sold to individualsand the sale of nationalizedhousing to occupants is in the process of being organized. This is expected to overcome the growing problems of maintenance encounteredin this sector. A new law is also being drafted to encourageprivate investmentand joint ventures in almost all major sectors excludingagriculture. All these steps, whilst understandablytaken with great caution (given the recent nature of PDRY's socialistexperience), should on implementationadd substantiallyto the country'seffort to mobilize additionaldomestic resources and enhance its productivecapacities and the efficiencyof its economic institutions.

DevelopmentProspects

5.2 The current (1978) economic situationis dominatedby the favorable impact of increased foreign resource transfer (throughboth workers' remittances and foreign assistance)to PDRY during 1976 and 1977. Commodity imports doubled in current prices between 1975 and 1977 creating an upsurge of import-inducedeconomic activity in almost all sectors of the economy. In addition,because of the growth of workers' remittances,real national income is estimatedto have increasedby an estimated28 percent in 1976 and 15 percent in 1977. The state budget also benefittedsubstantially -- both directly through increasesin receipts from customs duties and indirectlythrough the increase in profits of public sector finance and trading corporations(65 percent of the increase in revenue receipts between 1974/75 to 1977 are import related). Domestic fixed investments(financed almost entirely through foreign aid) also doubled in the period 1975 to 1977.

5.3 Given this dependence on external resource transfers, the volume of foreign exchange availableto PDRY will critically influenceits future developmentprospects. Both the inflow of workers' remittancesand foreign assistanceto PDRY have shown instabilityin the past and it is likely that - 54 - this situation will continue in the immediate future. It would therefore seem realistic and crucial to examine the possibilities of medium-term development of the PDRY economy in terms of alternative scenarios which differ primarily with regard to foreign exchange availability.

5.4 Our illustrative macro-economic projections (Tables 5.1 and 5.2 below) point out some of the options open to PDRY policy makers. The first scenario (Projection A) examines the implications of slow progress in changing present policies (including those aimed at attracting foreign assistance). More specifically, it assumes that the steps discussed in paragraph 5.1 above will be implemented only very gradually, and that no further action will be taken to deal with the issues summarized in paragraphs 1.17-1.23 (Chapter I). On the domestic economic front these imply no substantial measures aimed at meeting some of the major challenges facing the economy (in areas of productivity, planning, management of public enterprises and removal of urban/rural disparities). With regard to the external sector it implies no further action to strengthen workers remittances or increase foreign assistance from Arab countries. This would result in weak growth of remittances from Yemenis abroad, and a reduced level of foreign aid.

Table 5.1: ILLUSTRATIVE MACRO-ECONOMIC PROJECTION "A" (YD million, constant 1977 prices)

Growth Est. Projected Rate 1977 1978 1980 1982 1977-82

GNP, market prices 202 214 241 270 5.9 Net factor income 52 55 62 69 5.8 (Workers' remittances) (62) (65) (72) (79) (5.0) GDP, market prices 150 159 179 201 6.0 Retained imports 118 124 136 150 5.0 Exports, goods & NFS /I 36 39 46 53 8.0 Investments 69 73 80 87 4.7 (Public) (60) (62) (66) (69) (3.0) (Private) (2) (3) (5) (8) (32.0) (Stock Changes) (7) (8) (9) (10) (8.0) Consumption 163 171 189 211 5.2 (Public) (41) (44) (52) (61) (8.0) (Private) (122) (127) (137) (150) (4.0)

Memo Item: Deficit on goods & NFS - 82 - 85 - 90 - 97 3.5 Net Foreign Exchange requirements 30 30 28 28 (Foreign Assistance) (43) (30) (25) (25) (-11.5) (Use of Reserves, (-13) ( ) (3) (3) ( ) increase -)

/1 Including the gross value of the fisheries catch by the Japanese Nichiro Company. - 55 -

5.5 Accordingly,workers' remittances in ProjectionA are assumed to grow at 5 percent per annum and foreign aid is assumed to decline to YD 25 million (1977 prices) per annum for the period 1980-82. As a result imports are severely constrained (despite drawing down of reserves). Investmentand growth of domestic product are adversely affected (the latter being due also to the absence of change in economic policy). Most important,however, strict limits are placed on the growth of consumption. As illustratedhere the burden is borne primarily by private consumerswho experiencevirtually no growth in consumptionin real terms (the 4 percent growth rate in private consumptionbeing only marginally higher than the 3 percent populationgrowth rate).

5.6 The second scenario (ProjectionB) assumes effective domestic economic policies aimed at furtheringincreased productive efficiency,strengthening of planning and management,maximization of local resources among which measures to further increase workers' remittancesand active pursuit of foreign assistance. As a result this scenario assumes considerablesuccess by PDRY in stepping up workers' remittances(10 percent growth in real terms) as well as in securing foreign assistance (the level in 1982 being about 25 percent higher in real terms than in 1977). This would allow a substantially higher level of imports, permit the financingof a somewhathigher public investmentprogram (YD 360 million over the five years), encourage private investment,and lead to a higher rate of growth of domestic product (9 percent per annum in real terms). This growth would be the result not only of the higher level of imports and investmentbut also of institutionalchanges which encourageagricultural and fisheriesproduction and improve the efficiencyof public corporations. In addition,the higher volume of total resources available would allow the Governmentto increase public consumption(in particular the delivery of social services)and to substantiallyincrease private consumption by individualcitizens. - 56 -

Table 5.2: ILLUSTRATIVE MACRO-ECONOMIC PROJECTION "B" (YD million, constant 1977 prices)

Growth Est. Projected Rate 1977 1978 1980 1982 1977-82

GNP, market prices 202 222 267 321 9.7 Net factor income 52 58 73 90 11.5 (Workers' remittances) (62) (68) (83) (100) 10.0 GDP, market prices 150 164 194 231 9.0 Retained imports 118 131 160 194 10.5 Exports, goods & NFS /1 36 40 49 61 11.0 Investments 69 76 92 111 10.0 (Public) (60) (64) (72) (80) (6.0) (Private) (2) (4) (10) (19) (55.0) (Stock Changes) (7) (8) (10) (12) (11.5) Consumption 163 179 213 253 9.2 (Public) (41) (47) (60) (76) (13.0) (Private) (122) (132) (153) (177) (8.0)

Memo Item: Deficit on goods & NFS - 82 - 91 -111 -133 10.2 Net Foreign Exchange requirements 30 33 38 43 7.5 (Foreign Assistance) (43) (43) (48) (53) (4.3) (Use of Reserves, (-13) (-10) (-10) (-10) ( ) increase -)

/1 Including the gross value of the fisheries catch by the Japanese Nichiro Company.

Conclusions

5.7 PDRY has demonstrated significant ability in firmly pursuing economic development despite the many resource constraints under which it operates which include a low per capita GDP, small population base, harsh natural conditions and absence of significant natural resources. These resource constraints will inevitably continue to influence future development. Accordingly, future economic development must concentrate on maximizing the potential of resources available to PDRY, including its talented labor force. The implementation of policies geared at increasing the productivity of PDRY's economic institutions, reinforcing social development (including the removal of urban/rural disparities), and ensuring effective planning and management of public organizations, should, in conjunction with the mobilization of external resources substantially further the process of economic development in PDRY. ANNEX - 57 - Page 1

ISSUES IN DEVELOPMENTPLANNING, PUBLIC SECTOR MANAGEMENTAND ADMINISTRATION

A. DevelopmentPlanning

Introduction

1. The present political frameworkof socialism in PDRY has led the Government to work toward comprehensivesocial and economic planning. Build- ing adequateplanning institutionsstarted immediatelyafter independencewhen a High Council for National Planning was created in August 1968. But the scope and size of the planning effort was substantiallyenlarged with the deepeningcommitment of the Government to socialism,and, particularly,with the "correctivemovement" that took place in 1969. Thus, in 1969 a Planning Board was establishedwithin the structureof the "EconomicOrganization for the Public Sector and National Planning" 1/ and was entrustedwith substantial planning responsibilities. In October 1971, the Planning Board was upgraded to the status of a Central Planning Commission (CPC) which was separated from the Economic Organizationand attached to the Council of Ministers. In 1973 the CPC was changed into the Ministry of Planning.

2. Consideringthe administrativedifficulties that accompaniedthe establishmentof the planning machinery, it is not surprisingthat the first attempts at planning were made with considerableforeign assistance. The first Three-YearPlan (1971/72-73/74)was essentiallya developmentprogram focussingon the preparationof projects with foreign technicalassistance. A second Five-YearPlan (1973/74-78)was prepared in almost the same way, but with substantiallyenlarged participationof Yemeni staff, and with better coordinationbetween the Central Planning Commissionand the operatingminis- tries in assessing the objectivesof the plan. In addition,the Ministry of Industryhas been receiving, from 1975 onwards, assistance in industrial planning and management from UNIDO. The proposed third plan, for the period 1979-83, is now being prepared by the Planning Ministry in collaborationwith other ministries and governmentagencies. This plan is expected to be more comprehensive,covering such areas as foreign and home trade, manpower planning and productionplanning.

Planning Organization

3. The planning machinery in PDRY is highly centralizedin the hands of the Ministry of Planning, both for preparationand implementationof the plan, but it allows for a large participationby local authorities(Governorates) and sectoral organizations(operating ministries and public corporations). A great deal of consultationtakes place between those who express needs ard those who allocate resources in the planning process.

1/ The umbrella under which nationalizedfinancial, trading and shipping institutionswere placed between 1969-72. -58- ANNEX Page 2

4. At the political level, the major decision-making body is the Politburo of the National Front with the Economic Secretariat as its technical arm. The Economic Secretariat comprises the economic secretaries of Party branches at the Governorate level and six economic experts not affiliated with governmental bodies. The Politburo provides the guidelines for the preparation of both the five-year and annual plans, reviews their implementation at the national and local levels, and issues directives as to the corrective actions to be taken. In practice the Secretariat and the Ministry of Planning work in close collaboration at the preparatory stage as well as at the implementation stage. Reviewing agencies include the Politburo and the Central Committee of the Party, the High Council for National Planning (chaired by the Prime Minister, with the Minister of Planning as Deputy Chairman) and the Council of Ministers (which formally issues the plan). Once the guidelines are issued, the responsibility of elaborating the plan rests with the Ministry of Planning. Development projects are conceived, drawn up and defended throughout the selection process by a large number of organizations (including local governments). The Ministry of Planning retains the final power to screen those projects, coordinate them into programs and establish priorities within the limits of the likely available finance.

5. The Ministry of Planning works in close collaboration with two sets of planning units, one established in all ministries and public enterprises, and the other in the Governorates. These units are responsible for the preparation of the primary inputs in the planning process: the investment projects. However, there is a fundamental difference between the regional and sectoral planning units: the former are only responsible for social services projects, whereas the latter are responsible for the productive projects as well as for the coordination of social services projects when they fall within their purview, as in the case of the Ministry of Health or Education.

6. The sectoral Planning Units are responsible for the preparation and implementation of the plan in their field. This responsibility includes: (a) collection of relevant data on past performance and present situations in view of assessing the sectoral targets and priorities for the next five-year plan; (b) identification, formulation and appraisal of projects; (c) participation in negotiations with foreign sources of finance, led by the Ministry of Planning; (d) preparation of the annual investment plan (annual "tranche" of the five-year plan); (e) monitoring of project implementation; and (f) drafting of a production plan in some cases (industry, agriculture, or trade where the main task is to draft the annual import plan). To this effect the Planning Units which are directly attached to the Minister himself, coordinate the work of the Ministry's departments as well as that of the corporations which the Ministry supervises. Sectoral investment programs will then be drafted through a series of bilateral meetings between the Planning Units, reflecting the point of view which has been arrived at within each ministry, and the sector wings of the Ministry of Planning coordinated by the Deputy Permanent Secretary for Sectoral Affairs. -59- ANNEX Page 3

Plan Preparation

7. The most positive aspects of planning in PDRY are that the basic organizationalframework is well establishedand that there is a real commitment at the politicaland administrativelevels to put it to work effectively. The Governmenthas also been careful to keep its investmentprogram within the limits of the likely available finance. To be included in the five-yearplan (as well as in the subsequent annual plans) a project has to be backed by a reasonably secure source of finance such as: the commitment (or quasi commitment) of an external donor or lender, allocation of funds by the Ministry of Planning against the DevelopmentFund, allocationof funds against the internal resourcesof the executive organizationresponsible for the project or a guaranteedbank loan 1/; and appropriate feasibilitystudies. The original targets of the current plan (75 million YD of investment)have been largely exceeded over the first four years of its implementation(129 million YD up to the end of 1977) as new resourceswere made available. However, though this approachmay ensure sound financingof developmentprojects, the experiencewith the last plan pointed to several major weaknesses of the planning process: the lack of macro-economicanalysis that would enable the planner to take a clearer view of the direction and pace of the development effort; the need for more effectiveplan coordination;and the inadequacy of present project analyses.

Economic Analysis

8. No macro-economicframework was prepared for the last plan. The consequencesof this were that:

(a) the plan was essentiallya list of investmentprojects selected and modified on the basis of available sources of finance and not always well related to one another;

(b) the relative priorities and the alternativecosts of different ways to implementcertain objectiveswere not explored and tested. The result is that technicalor financialconsidera- tions often supersede economic analysis in the design of projects (for example a project will be largely over-sized,or excessivelysophisticated without due considerationbeing given to the alternativeuses of the funds that could have been saved had a more appropriatedesign been selected). The Government is aware of this situation and is taking steps to remedy this situation.

1/ It is the mission's understanding,however, that these constraintswill be somewhat relaxed for the next plan: a "core" plan will include only those projects for which foreign exchange has been secured; other projects will be included to be started later in the period covered by the plan (1979-83)according to the financemade available. ANNEX - 60- Page 4

9. Without embarking on excessively sophisticated exercises, there is a need to work out some form of macro-economic frame in which the main parameters would be rationally related. The relevant parameters are the rate of growth of the population; the basic food ration deemed necessary to feed it; the GDP by sector and the expected growth rate in each sector; the necessary investment; the major components of the balance of payments and, in particular, the need of foreign exchange and the likely commitments of foreign sources over the period; employment; wages; savings; and taxation and government expenditure. Some kind of iterative process should be established between the building of the macro-frame and the drafting of sectoral programs showing what specific goods will be produced, what can be achieved within investment needed, what is the increase in government recurrent expenditure which can be tolerated, etc.

10. There are two fundamental reasons why this type of work is not undertaken at present: one is the lack of relevant statistical data (an issue examined later in this Annex), the other is the shortage of qualified staff in the Economic Affairs wing of the Ministry of Planning. The Economic Affairs section is divided into five departments (economics, finance, technical and economic cooperation, Arab and International Organizations, and manpower) that are critically understaffed and perform more routine activities than planning tasks in the proper sense. The Economics Department has only four professionals (of whom two are recent graduates). The Manpower Depart- ment has only two professionals. They are expected to draft the entire manpower balances for the preparation of the next plan. The Finance Department, which also has three professionals, puts together the Development Budget, keeps track of development expenditure and authorizes financial transfers within the Development Budget, but plays no part in financial planning or resource mobilization in the proper sense of the word. Nor is this task carried out by the Planning Department in the Ministry of Finance. On the other hand, ten professionals are working in the two departments for technical and economic cooperation. Their main functions is to keep records of loans and grants, of expenses made against them, of the debt situation (a task which is also carried out in the Bank of Yemen), of training opportunities abroad and of foreign experts sent under technical assistance agreement, and preparing and following up the economic and technical cooperation agreements and protocols. Given this unbalanced situation it appears urgent that a complete review of the Economic Affairs Department be undertaken with a view to reinforcing the economics, manpower, and finance departments and directing their activities towards planning preoccupations. Necessary steps should also be taken to supplement these departments with qualified staff. The mission suggests that, as a first step, a focal point be established within the Minis- try of Planning for collecting the relevant information from various sources, carrying out medium to long term macro-economic analysis and elaborating the outlines of policies derived from this macro-analysis. In fact the Ministry has started reorganizing the structure of the Department in this direction.

Plan Co-ordination

11. Another important task would be the formal constitution of a set of interdepartmental working parties with clearly spelled out terms of reference ANNEX - 61 - Page 5

for the preparation of the plan. The present procedure of bilateral consulta- tions between the Ministry of Planning and the other organizations does not allow, as an apparatus of interdepartmental working parties would, for a systematic exchange of the information available, a cross-examination of the points of view involved in the drafting of policies and the selection of the best ways to implement them. To take only one example, the responsibility for collecting information and taking actions relevant to finance is divided between the Ministry of Planning (capital expenditure and foreign loans), the Ministry of Finance (current resources and expenditure, public corporations savings), the Bank of Yemen (foreign exchange management and credit policy), and the Ministry of Foreign Affairs (commodity loans and grants, prospects for workers' remittances). These agencies are only brought together under the Higher National Planning Council. During the preparation of the last plan (1974-78), neither the Ministry of Finance nor the Bank of Yemen participated in the drafting of sectoral programs prepared by the other ministries and no investment ceilings or maximum increase acceptable in recurrent expenses were given to these ministries. Working parties should also cover both the sectors and subject matters that cut across sectors such as water, manpower or finance. They should be managed by the Ministry of Planning which would be represented on all of them, with responsibility for the secretariat, to ensure good coordination of the work. This would require an intellectual and research effort on the part of the Ministry of Planning to infuse analysis and proposals in these committees (it being understood that papers could be presented by all members) and to revise and redraft the policy papers in the light of discussions that took place. But this effort will have to be made in any case if the Ministry of Planning is to make a valuable contribution to the preparation of future plans. This exercise would also be the best training ground for the staff of the Ministry who are too much involved in routine activities.

Project Analysis

12. Another urgent need is to develop the capability to prepare investment projects and to work on feasibility studies. The responsibility for project preparation and appraisal rests in the Sectoral Wing of the Ministry of Planning and the Planning Units in the operating ministries and corporations. The Ministry of Planning has no project evaluation capability, whilst the Planning Units are still weak and rely almost entirely on outside expertise (consulting firms) to carry out project studies. The result is that problems such as oversize, lack of provision for the maintenance of equipment or lack of coordination with other sectors of the economy (e.g. local construction capacity) are overlooked when the proposals put by the consulting firms are checked. Also, scant attention is given to manpower requirements. Until now (1978) it appears that the examination of the manpower component of a project has been limited to securing the project manager, the accountant and an engi- neer. However, the feebleness of the Manpower Department in the Ministry of Planning, the lack of data (the results of the 1976/77 manpower survey are not yet available) and the treatment of the manpower component of projects, all reflect the neglect of manpower planning. The Ministry of Planning hopes to remedy this situation in the next plan. ANNEX - 62 - Page 6

Annual Plan and Development Budget

13. The Annual Plan and the Development Budget are the fundamental legal instruments for the execution of the medium-term plan - both documents being prepared in or under the control of the Ministry of Planning. In theory, annual plans are yearly tranches of the five-year plan but, in practice, new projects drawn from a reserve list are often inserted in the annual plan. The same strict financial conditions that must be met to include a project in the medium-term plan also apply to the inclusion in the annual plan. The Ministry of Planning is not only responsible for the expenditure side of the plan but also exercises overall control over the sources of finance: viz (i) loans from the banking system, (ii) self-financing, (iii) foreign loans and (iv) Develop- ment Fund. The expenses to be incurred for each project are detailed according to the above four sources of finance and to three categories of expenses: (i) studies and design, (ii) machinery and equipment, and (iii) construction. The annual investment program is submitted to the High Council for National Planning, the Council of Ministers, and, then, passed into law by the'People's Supreme Council. In addition, there is a mid-year review of the annual plan where the implementation of ongoing projects is assessed, possible shortages in foreign resources are considered, and projects may be added or deleted.

14. The Ministry of Planning also prepares the Annual Development Budget which details the expenses to be incurred against the Development Fund for each project under seven headings: (i) studies and design, (ii) buildings which can be converted for project use, (iii) construction, (iv) machinery and equipment, (v) furniture and other assets, (vi) wages and salaries, and (vii) other investment expenditures. The Budget is prepared by the Finance Department of the Ministry of Planning with the collaboration of the sectoral departments and the revenue side is drafted by the Ministry of Finance and the Ministry of Foreign Affairs. Its publication gives legal authority to the ministries and project managers to commit all expenditures regarding the project, whether financed from the Development Fund, bank loans, self-financing or foreign financing. Changes of allocation from one Ministry to another can only be authorized by the High Council for National Planning. The Ministry of Planning must authorize all other changes from one project to another within the total amount allocated to a given Ministry, while changes one expenditure head to another with regard to a particular project is done by the Planning Units in the Ministries concerned if the total cost of the project is not affected.

15. In future it is expected that the Ministry of Planning will issue only the Annual Plan and the Development Budget will be consolidated within the country's Unified Budget where the breakdown of expenditures will be suit- ably changed.

Control of Current Expenditures

16. At present there is no systematic coordination between the development budget and the ordinary budget, even though the decisions embodied in the former impose recurrent expenditures on the latter. A special committee was formed in 1976 to review this issue and propose coordination between the ANNEX - 63 - Page 7

Ministry of Planning and the Ministry of Finance when formulatingthe Develop- ment and RecurrentBudgets but has not yet formulatedany proposals. It is of the utmost importancethat the Ministry of Finance should have better know- ledge of trends in revenue and expenditureand that there should be closer coordinationof some of the activities of the Ministry of Finance and the Ministry of Planning. A reform under considerationto be introduced in the near future could help in this matter. It has been proposed to substitutea single 90% levy on the profits of public corporationsfor the present taxation formula (separatecontributions to the DevelopmentFund, RecurrentBudget, and the Price StabilizationFund and a corporateprofit tax). In particular this reform would cut the 25% the corporationsare allowed to keep as cash flow to a mere 10%. This reform should be supportedbecause it would increase public revenue, streamlinethe financialchannels ending in the Government's hands and force the Ministry of Finance and the Ministry of Planning to have an open debate over the sharing of these resourcesbetween recurrent expenses and new investments. In all events, it is critically importantto transform the Planning and StatisticsDepartment in the Ministry of Finance, presently engrossed in purely routine work, into a real ProgrammingDepartment with the responsibilityfor forecastingtrends of future recurrentexpenditures, for making revenue forecastsand for making adequate provisions for recurrent expendituresarising from the acceptanceof new developmentprojects. It is vital that the Governmentbe aware of the possible increases in the burden of taxation (or decrease in productive investment),particularly in the social sectors.

Project Implementation

17. With regard to the implementationof individualprojects, serious problems arise due to the shortage of trained Yemeni counterparts,delays in implementationcaused by dependenceon imported equipment,delays in the recruitmentand fielding of foreign experts, severe labor shortages in the area where the project is located, and deficienciesin infrastructure. All these causes are well known and fairly common in less developedcountries and the situationcan only improve with time. Progress could, however, be made in the reporting system. The Ministry of Planning monitors the implementationof projects through regular field visits in coordinationwith the operating ministries and through quarterly progress reports. The reports are filed in by the project managers followinga standard format prepared by the Ministry of Planning and used for all categories of projects. These reports provide informationon the financial,physical and manpower aspects of project implementation,but they could better serve an effectivemanagement of projects if the followingpoints were taken into consideration:

a) The financialsection of the report does not provide for an analysis of cost varianceswith referenceto detailed project budgets, such as variation in actual costs, anticipatedexpenses for next quarter or next year, anticipatedfluctuations, nature of claims or other causes leading to increasedcosts, etc. Since ANNEX - 64 - Page 8

this information is not available for the past it is all the more difficult for project managers to anticipate variations and therefore warn of cost overruns, which they should be required to do.

b) The manpower section has been added recently to the standard forms and is generally not properly filled.

c) The information provided on the physical advance of projects is very sketchy and this section should be expanded to show actual achievements by broad categories as against planned achievements.

The rationale behind these suggestions is that the project managers should be more firmly guided in identifying the shortcomings and difficulties they face by a more detailed design of the forms used for the reports. In turn this would greatly help the drafting of subsequent project budgets.

18. UNIDO has undertaken to draft a new set of terms of reference for project managers, model clauses to be included in contracts requiring the contractors to report to the project managers in the appropriate manner, and a new format of progress reports. These should be useful in improving the management of project implementation in other fields as well.

19. The accounting and financial control systems with regard to project implementation are weak. They do not provide adequate management tools nor do they produce good cost accounts for the evaluation of results. The accounting procedures are cumbersome and not well integrated, and differ according to the sources of finance. The key disbursement agency for project implementation is the Project Department in the Bank of Yemen. In effect the Project Department in the Bank of Yemen acts as the ministries' banker. Project managers pay the expenses incurred against the Development Budget by issuing purchase orders to the delivering agencies. The Project Department in the Bank of Yemen vets the orders, disburses the monies, keeps the accounts for each project under the seven heading appearing in the Development Budget, and produces a monthly statement of expenses by project. The same information is recorded in the vote book kept by each ministry for its capital development expenses, in the Ministry of Finance (by a special section in the Budget Department), and by the Finance Department in the Ministry of Planning. For project expenditures financed against a bank loan or self-financed by the responsible corporation, the accounting procedure is left to the relevant ministry or corporation which informs the Ministry of Planning. Expenditures against foreign loans, grants or export facilities are recorded by the Bank of Yemen which keeps a separate account for each loan and keeps track of the expenses incurred by project and category of expenses. The Bank of Yemen participates in the discussions of the loan agreements with the Ministries of Planning, Finance and other relevant Ministries. This is done because the Bank of Yemen and the Ministry of Finance act as an ultimate screen between the lender and the final user. The Bank receives requests to pay from the lender and the Minis- try of Finance authorizes the payment. There is no arrangment yet to make the project or the public corporation bear the cost of the funds. Finally, grants in kind are recorded by the Ministry of Finance which uses the proceeds for financing the Development Fund. It is left to the relevant ministry or corporation to incorporate them in their assets at the value they deem appropriate. -65- ANNEX Page 9

20. The main inadequaciesof this system are the following:

(a) Though four different agencies are keeping records of expenses, this machinery does not really ensure a proper checking of accountsbecause of the time lags between purchasing orders and payments made.

(b) Another consequenceof this inaccuracy is that it makes it very difficult to produce good cost accounts for the projects. This difficulty is compounded by the inadequateaccounting procedure for capital items. The cost of these items is debited to the contract under which they are provided and not to the project in which they are actually used. This may result in large dis- crepancieswhen a contract is signed for purchasingpieces of equipment (e.g. tractors)which will be allocatedto different projects.

(c) The accounting system does not allow for the drafting of an opening balance sheet for the new plant to start with, in particular it does not produce a capital account showing the value of assets installed, the sources of financewith which they have been paid and the outstandingdebt incurred.

A reform of the present system is currently being undertaken by the UNIDO advisory team in the Ministry of Industry (with whom the above issues were discussed). But it is most important that these efforts not be confined within the Ministry of Industry but examined in a larger context, passed into law if appropriate,and applied to all projects. The new accountingsystem should be devised with a view to:

- streamlinethe accountingmachinery and reduce the number of people involved,

- incorporateall expenses, irrespectiveof their sources, in a uniform system of accounts used from the project budget down to invoices and purchase orders,

- design the system of accounts accordingto economic considerations (e.g. for the breakdown of expenses),each account having a precise and predeterminedcontent, and

- centralizeall the informationrelated to a project on a standard form to be updated regularly (twice a year, for example, when the annual plan is drafted and when the mid- year review takes place).

The Central StatisticalOrganization

21. The responsibilityfor collectingand publishing statisticaldata is entrusted to the Central StatisticalOrganization which comes directly under the Minister of Planning. The CSO has a large staff of 189 persons of which ANNEX - 66 - Page 10

17 are graduates (B.Sc.). Most of the staff is working in Aden, but 54 statistical clerks are located in the Governorates. In theory, Planning and Statistics Departments in the ministries and corporations and statistical clerks in state farms and cooperatives also carry out statistical work. In addition, two experts of the Kuwait Fund advisory team have been particularly helping the CSO, one for data collection activity and the other for national accounts. Thus the CSO has been able to:

- publish an economic and social report covering the period 1969-1976 (with a set of national accounts from 1973-1976)and summing up the availabledata in view of the preparationof the next five-year plan. The Kuwait Fund team has been heavily involved in this task;

- hold a populationcensus in 1973, of which the results are, however, not yet available (except for some sample studies);

- conduct a survey of the present manpower situation, in the public sector, of which the results are also not yet available;

- conduct, in collaborationwith the Ministry of Local Administration, a social survey in the first four Governorates (however, since this survey is not based on a probabilisticsample, its results do not reflect national averages);

- publish current statistics: foreign trade, money and finance, production,acreages under cultivation,employment, wages and, since 1977, home trade.

22. The reliabilityof much of the data published is limited. The statisticson foreign trade and banking and finance (the National Bank of Yemen and the Bank of Yemen send quarterly reports to the CSO) are probably more dependablethan the data on most other sectors. Least dependable is the data on the most importantsector, agriculture. Industrialdata, whilst reasonably accurate is received with much delay (three to four months for the quarterly reports, six months to one year for the annual documents). This situationreflects in the quality of national accounts, since the inputs for calculationsvia the product approach are of poor quality, and since there is no reliable basis for the estimation of private consumptionand stock variations in the expenditureapproach. Little can be said of the population and manpower statisticswhich are not yet available. However, it seems that the results of the 1973 census will be largely outdated when they are published (some time in 1978) and it has been reported to the mission that there were serious weaknesses in the way the manpower survey had been conducted (in particular, it does not provide any informationon the future trends of work force and employmentbut concentratesonly on the existing situation).

23. Improving the reliabilityof the existing statistics should be a major objective in a centrally planned economy. Improvementof the data base for the planning process requires (i) the drafting of a work program for the CSO identifyingthe most urgent needs and (ii) an intense training program for ANNEX - 67 - Page il statisticians both in the Ministry of Planning and in the operating ministries and economic organizations. It is the missions understanding that a general census of agriculture is being prepared with the assistance of UNDP to begin in the end of 1979. This census should have the highest priority. Other important areas for which the CSO needs assistance are: a survey of household expenditures, a cost of living survey, an industrial survey, and, probably, subject to further examination, a thorough supplement to the manpower survey (collecting, in particular, the data required for estimates of future trends and also covering migration).

B. Management of the Public Sector

24. The Government's increasing commitment to socialism has been reflected in the establishment of a large public sector which, today, carries the main responsibility for the economic and social development of the country. The public sector was first organized in an Economic Organization which acted as a holding company and which included also the planning commission. In 1973, the Economic Organization was terminated and the public entities were made autonomous and placed under appropriate ministries for policy guidance. However, the range of decisions each enterprise is in a position to make "independently" is limited since investment outlays, import programs for raw materials as well as most selling prices are decided upon by governmental committees. In addition, production planning has been introduced in agriculture and, more recently, in industry. In effect, public sector enterprises are thus operating under severe constraints and the managerial work is concentrated on internal operations. This arrangement is reflected in the composition of the boards of public corporations which comprise the top management of the corporation and one or two worker's representatives and are essentially managing boards. However, the ministries concerned as well as other interested entities (e.g. the state farms and cooperatives on the board of the Public Corporation for Marketing Fruits and Vegetables) may also be represented on the board.

25. The framework for management and financial control of public sector enterprises has been set by law No. 11 of 1973 that applies to all state-owned undertakings, including state farms. The financial control of public enterprises is tight and centralized but ineffective because the proper tools for such a control, and above all a uniform system of accounts, are lacking. Each entity is answerable to the relevant ministry and the Ministry of Finance. To this effect a Public Sector Department has recently been established in the Ministry of Finance with eight professionals having either a BA or previous accounting experience. The Public Sector Department is represented on the Board of all Public Corporations. In addition, public entities must submit their annual budgets to the relevant ministry and to the Public Sector Depart- ment three months before the beginning of the calendar year. The budgets are then forwarded to the Prime Minister's Office for formal approval (the real decision is taken in the Ministry of Finance). Approval of the budget authorizes the management of the enterprise to make the expenses provided for. Quarterly financial s,tatementscomparing actual and budgeted expenditures and -68- ANNEX Page 12 receipts and explaining the reasons for discrepancies are also sent to the Public Sector Department which pays quarterly visits to each enterprise. The Law provides that if the entity's resources "are not sufficient for financing its operations, the deficit shall be settled either by borrowing from the bank or by any other way determined by the Ministry of Finance". In addition, according to the Law, final accounts must be forwarded to the Ministry of Finance and Ministry of Planning no later than seven months after the end of the year. Law No. 11 also provides for the distribution of profits. Net profits are arrived at normally, but the Minister of Finance, after consultation with the competent Minister, may allow special deductions from current revenue for bad or doubtful debts or for the constitution of special reserves. The distribution of net profits is done according to the following breakdown:

- income tax: 37.5%

- contribution to Price Equalization Fund: 5% of income tax

- the remaining share (net public sector savings or after tax profits) is then distributed between:

- contribution to current government revenue: 25%

- Development Fund: 50%

- enterprise's cash flow: 25%

The contribution to the Development Fund is paid bi-annually (June and November) on the basis of the annual financial statements.

26. A Central Board of Audit established in 1972 is entrusted with the responsibility for auditing the accounts of all Government Departments and enterprises in the public sector and also, on a voluntary basis, of some companies in the private sector. The Board reports directly to the Prime Minister and is independent of the various executive departments of Govern- ment. The Board reviews all procedures of enterprises and undertakes physical verification of cash and inventories, both on a regular basis and on a sur- prise basis, as a part of its audit. It also obtains confirmation of balances from customers. For large corporations, a resident audit group is permanently assigned to the corporation to conduct a concurrent audit, and in addition there is the usual year-end audit of the accounts of the corporation. The law allows four months for the Board's audit of an enterprise's accounts but according to the Central Statistical Office delays are much longer and are a major drawback in the establishment of regular national accounts.

27. While Law No. 11 sets the general legal framework within which public entities operate, the quality of management varies widely across the public sector. By and large it appears that the Aden-based concerns that were already well established before independence are reasonably well managed by qualified and trained professionals, particularly in senior positions. The Public Water Corporation, the Public Corporation for Electric Power, the Aden Refinery, the Yemen Public Shipping Corporation are cases in point. The main ANNEX - 69 - Page 13 problems these corporations are facing is maintenance and renewal of their operating equipment after several years of neglect. More recently established corporations, in manufacturing and distribution, generally with a monopolistic position in their field, have been obliged to stretch their operations and have both a need for more and better maintained equipment (transport companies, in particular) and better management.

28. The shortage of qualified staff, especially in junior positions, to support higher management and eventually replace it, is acute and compounded by the limitations of the local educational system and the competition between various employers. A recent study by UNIDO estimated the number of qualified staff required at the higher and middle levels in the companies placed under the Ministry of Industry's supervision at 570 persons until 1980. But only 250 persons are under training at present. The Government is aware of the key problem of the shortage of trained staff. The Government is making use of foreign advisors, sends junior managers abroad for training and has created a college of economics and administration in Aden University which is partly devoted to such training. The Ministry of Finance has been training its staff in accounting, secretarial work and store control, and also organizing with the coordination of Aden University a two-year diploma course in accounting. A six-week factory management course with some 30 participants has also been run by UNIDO. But these efforts will have to be greatly enhanced to cope with the pressing staffing requirements of the public sector.

29. The mission recommends that immediate action be taken to introduce a uniform system of accounts in the public sector. Public enterprises keep their accounts in varying, and often unsatisfactory, ways which makes it difficult to audit them easily and, even more important, to establish consolidated accounts of the public sector. The mission had access to the accounts of only a few public enterprises in the Public Sector Department in the Ministry of Finance. The budgets are not presented in a unified format, the list of accounts kept and their precise content are not standardized. There- fore, it is impossible to produce meaningful aggregate data as a matter of routine.

30. The Government is aware of these shortcomings and seems to be willing to introduce a more effective system of financial control. Thus amendments to Law No. 11 are being considered with a view to streamlining the collection of contributions to Government expenditures by substituting a single 90% levy on the companies' profits to the current variegated earmarked taxes. Other amendments contemplated would make the corporations more account- able to the Ministry of Finance and, in particular, introduce a representative of the Ministry on each board. The Government has also commissioned studies of accounting systems to be introduced in the public sector. A standardized system of accounts should serve the following purposes:

- to manage production units more effectively

- to establish cost accounting systems

- to facilitate internal and external audit ANNEX - 70 - Page 14

to link the public entity's accounts with the national income accounting system (by producing the relevant tables as a matter of routine) and generally provide the statistical organization with appropriate information (in particular, the data must be processible by the computer installed in the CSO).

31. Such a system has been prepared for cooperatives and state farms by an ILO mission in 1976. It is now being tried in 20 production units and accountants are being trained to use it in the Cooperatives Institute. It should be extended to the whole agricultural sector in 1980. In the Ministry of Industry, a management accounting system is being prepared with UNIDO assistance. The mission has reviewed the proposed simplified system of accounts and, in its opinion, two points need further attention: the preparation of standardized forms for synthesis accounts (such as a current account framework to be used in national income calculations) and the establishment of a technical committee to review the existing depreciation rules and make the appropriate recommendations. The Government has expressed its intention of imple- menting a standard system of accounts in future.

C. Public Administration

Civil Service Administration

32. Since the country achieved independence, but especially since the "corrective movement" of 1969 the efforts of the Government (and of the National Front) have been aimed at producing a unified socialist state out of an area that, under British rule, had been divided into the city of Aden, with a modern system of administration, and numerous feudal sheikhdoms, emirates, and sultanates. At that time, very few Yemenis occupied even middle level positions in the public service. Key positions were held by British nationals and other expatriates were working under their supervision. At independence, therefore, the Government was faced with the formidable task of completely reestablishing an effective civil service. The need to fill vacant posts and the effort to reduce urban unemployment, which was quite high in Aden, has resulted in a striking growth of Government civil workforce. It expanded from 13,274 employees in 1970 1/ to 19,500 in 1974 and 32,183 in 1977 (Statistical Appendix Table I.5). Another 3,000 employees of municipalities must be added to the 1977 figure to get the total public workforce. Many of the difficulties of the present administrative system spring from its rapid growth and the inadequate organizational framework in which it took place.

33. A remarkable feature of public administration in PDRY is that it is organized and managed as an integrated part of the general workforce of the country and not ruled, as in most other countries, by specific statutes and pay scales. This arrangement represents an attempt not to establish the

1/ According to Farouk Luqman, Democratic Yemen Today, Bombay, 1972. -71- ANNEX Page 15 civil servants as a privileged minority. The whole workforce, with the exception of cooperative workers, is organized in four cadres of personnel with uniform pay scales, incentive schemes and promotion rules based on the "omeritsystem", at least in principle since there is no comprehensive personnel law but rather a mixture of specific decrees and common practices. The general framework is the following (the budgeted posts refer only to the approved positions in the central government budget):

Number of Cadre Budgeted Posts Basic Salary Recruitment Level (1977) (YD/month)

Management ) 60 to 69 Promotion from lower level ) 12,385 Executive ) 35 to 59 Secondary school to University

Clerical and 15,315 26 to 34 The Eight-Year School to Skilled Workers Secondary School (12 years)

Unskilled Workers 4,483 20 to 25 No requirements

34. The responsibility of manpower management and supervision of labor problems in all branches of activity is entrusted to the Ministry of Labor and Civil Service which was created in 1974 from the Ministry of Labor and Welfare and the Civil Service Department. Personnel management is centralized in the hands of the Ministry which deals with every aspect of it and must authorize all appointments, classifications, promotions and transfers, training programs and also establish retirement and pension schemes. This over-centralization, however, is likely to have some adverse consequences on the management of civil servants; viz.

(i) It undermines the authority which the executive officers in the ministries, primarily the ministers themselves, must have to re- cruit, allocate and supervise their personnel. Such authority is all the more important since there is another institution invested with the power to check the Minister's decisions regarding personnel matters. A Personnel Committee, made up of union, party and management representatives and headed by the Permanent Secretary of the Ministry, must approve promotions and transfers of personnel before they are submitted to the Ministry of Labor. It is also consulted on all aspects of personnel management in the ministry and performs general "surveillance" functions. Although, generally, the Ministry of Labor complies with the recommendations of the competent minister should a conflict arise, the latter's opinion cannot prevail.

(ii) While this arrangement, according to the Ministry of Labor, has been designed chiefly for statistical purposes and efficient allocation of scarce manpower, the Ministry is not sufficiently well equipped ANNEX -72- Page 16

to achieve these goals.l/ The procedure of compulsory approval of transfers does not ensure enough stability of the workforce either, since the Ministry cannot actually monitor and control each and every change and, in fact, very often contents itself with regular- izing them. According to several managers there is a very high mobility of the workforce, especially at the lower levels of the hierarchy with adverse consequences on productivity and continuity of work.

35. An acute shortage of qualified personnel is the most evident weak- ness in the civil service, as has already noted in the fields of planning and statistics. In principle, recruitment is linked to educational level. But the formal academic requirements very often have had to be relaxed to fill the most needed positions and many other considerations are taken into account (for recruitment as well as promotion) such as previous experience in a given position, political reliability of candidates, etc. depending on the nature and the hierarchical level of the post considered. In addition, whilst the educated labor force is also likely to be augmented by the Yemenis studying abroad, relatively few of them are expected to graduate in the fields most relevant to public service such as economics and statistics, public administration, law, and accountancy. There is, therefore, clearly an urgent need to establish systematic training programs in these areas of public administration.

36. The uniform pay scales applying throughout all branches of the public sector precludes wage competition between the civil service and public enterprises. Basic salaries range from 20 to 69 YD/month, but fringe benefits, such as housing facilities or opportunity to buy cars, attached to higher positions, make the real gap wider than it looks when direct wages alone are considered. The basic salary scale is supplemented by a system of allowances designed to reward competence in specific skills and to promote efficiency. There is a 10 to 25% of basic salary allowance for qualified professionals such as doctors, accountants (but apparently not for statisticians who are urgently needed too). An efficiency allowance has been established in 1977 and may reach 50% of the basic salary. There are other allowances for senior- ity, for acting in a higher capacity than one's classification and for over- time (in the lower grades only). Encouraging efficient use of the workforce is one of the main problems the Yemeni economic and social system is facing at present, and one which extends much further than the civil service. It is the mission's impression that the top echelons of the bureaucracy are motivated and dedicated to their work, but that dedication and hard work decrease as one goes down the hierarchy. The Government is well aware of the problem and is beginning to implement a two-pronged policy to deal with it. First, it intends to offer better compensation to workers engaged in productive activities than to those in services. This policy particularly aims at encouraging

1/ For example, it was not possible to get, as a matter of routine, tables detailing the location, classifications and compensation of civil servants. Another reason for the inability of the Ministry to perform this task is the absence of a reliable manpower survey (see earlier Sections of this Annex). ANNEX - 73 - Page 17

those occupying the lower levels of the civil service to move to manual labor. It does not seem likely, however, that many of them can be attracted to farm work. Second, vocational training opportunities are offered in fields where skilled labor is particularly scarce such as mechanics, electricity, carpentry, etc. At the end of the training period, trainees are eligible for better paid positions in the "skilled workers" cadre that would normally require secondary education. It is, however too early to assess the results of this policy.

37. The present lack of statistical data makes it difficult to have a very precise view of the situation of the civil service. However, some problem areas are identifiable and the mission recommends that, as soon as the results of the manpower survey which is being processed are available, a special task force be appointed to:

(a) examine the relations between the Ministry of Labor and Civil Service and the other ministries, assess the consequences of the excessive centralization of responsibilities in the former and recommend a new distribution of roles,

(b) review the present allocation of qualified manpower between the various departments and recommend a reassignment of personnel better suited to the most important requirements,

(c) set up an in-service training program for civil servants in the "management" and "executive" levels and assess the best way to carry it out,

(d) develop a public service manual incorporating and rationalizing the existing scattered rules, regulations and common practices relevant to this matter. - 74 -

MINISTRY OF PLANNING Organization Chart I

Minister of Planning I

Central Statistical . l ~~~~~~Organization

PermanentSecretary

Deputy permanent Deputy Permanent Secretary ___Secretary Economic Affairs Sectoral Affairs

Economics (4) Planning Unit Industry (1) l______l______Governorate_ __l_1st_l_ l

Finance (3) Planning Unit Agriculture (3) 2nd Governorate

Bilateral Planning Unit Transport and Cooperation (8) 3rd Governorate Communications (3)

Cooperation vvith Arab and Planning UnitSoilercs 4 International 4th Governorate Social Services 4) Organizations (2)

Manpower (2) Planning Unit Construction (I I 5th Governorate C l

_ Planning Unit 6th Governorate

In Parentheses number of graduate professionalsin each department, including the head of department

World Bank - 19186 - 75 -

CENTRALSTATISTICAL ORGANIZATION OrganizationalChart 11

Director General (1)

Deputy Directr Deputy Director Depty rector | General for General for General for Technical Affairs (1) Computer Center (3) Administration . and Trai~~~~~~~~~~~~~~ning

Population and _ _e.t. Social Statistics (3) Traiing Center

National Accounts (4) Administrative Affairs

[ Production Statistics (4)

Trade and CommerceStatistics (1)

Governorates Statistical Units

In Parentheses:number of graduate professionalsin each department, including the head of department

World bank - 19187 -76-

STATISTICAL APPENDIX

Table No. 1. POPULATIONAND EMPLOYMENT

1.1 EnumeratedResident Populationby Age Group, Sex and Urban/RuralComposition, 1973 1.2 Manpower Estimates,1969-1976 1.3 Employed Labor Force by Sector, 1969-1976 1.4 Annual Average Wage Rates by Sector, 1973-1976 1.5 Central GovernmentCivil Work Force, 1973-1977

2. NATIONAL ACCOUNTS

2.1 Value of Gross Domestic Productionby Type of Economic Activity at Current Factor Cost, 1973-1976 2.2 Value of Gross Domestic Productionby Type of Economic Activity at Current Market Pricea, 1973-1976 2.3 Gross Domestic Product at Current Factor Cost, 1973-1976 2.4 Gross Domestic Product at Current Market Prices, 1973-1976 2.5 Gross Fixed Investmentat Current Prices by Public and Private Sector, 1969-1976

3. BALANCE OF PAYMENTS

3.1 Summary of Balance of Payments, 1973-77 3.2 Balance of Payments, 1973-77 (US$ Millions) 3.3 Balance of Payments, 1973-77 (YD Millions) 3.4 Net Foreign Assets, 1972-1977 3.5 Compositionof Exports and Re-Exports,1973-1977 3.6 Direction of Exports, 1973-1977 3.7 Compositionof Imports, 1973-1977 3.8 Origin of Imports, 1973-1977

4. EXTERNAL DEBT

4.1 OutstandingExternal Debt, 1972-1977 (YD Millions, end period) 4.2 OutstandingExternal Debt, 1972-1977 (US$ Millions, end period) -77-

Table No.

5. PUBLIC SECTOR FINANCE

5.1 List of Public Sector Entities as of March 1978 5.2 Summary of GovernmentFinances, 1974/1975-1978 5.3 Central GovernmentRevenues, 1974/75-1978 5.4 Central Government Ordinary Expenditures,1974/75-1978 5.5 Planned and Actual Expendituresunder the First Five Year Plan, by Sector 5.6 Planned and Actual InvestmentUnder the Five-Year Plan, by Source of Finance 5.7 DevelopmentFund Sources of Finance, 1974/75-1977 5.8 Planned and Actual Investment During the Three-Year Plan (1971/72-1973/74)and the First Four Years of the Five-Year Plan (1974/75-1978)

6. MONEY AND BANKING

6.1 Monetary Survey, 1973-1977 6.2 Factors Affecting Changes in Domestic Liquidity, 1973-1977 6.3 Ratio of Currency and Deposits to Total Liquidity, 1972-1977 6.4 Balance Sheet of Bank of Yemen, 1973-1977 6.5 ConsolidatedBalance Sheet of National Bank of Yemen, 1973-1977 6.6 Distributionof Loans and Advances of the National Bank of Yemen, 1973-1977 6.7 Interest Rates as of January 1, 1978

7. AGRICULTURE

7.1 Land Area by Major Use Classification,1977 7.2 Potential Expansionof Cropping Based on Suitabilityof Soils for Irrigation,1977 7.3 Annual Variation in State Irrigationby Major Wadis, 1977 7.4 Estimated Permanent Labor Force in Agricultureby Type of Farm, 1977 7.5 Total and Cultivableareas of State Farms by Governorates,1973/74-1976/77 7.6 Number and Membershipof Cooperatives,1967-1976 7.7 ProductionCooperative Farms, 1974-1977 7.8 Area and Production of Major Crops, 1974-1977 7.9 Locally Produced Vegetables and Fruits Handled by Public Corporation for Marketing of Fruits and Vegetables,1974-76 7.10 DevelopmentInvestment in AgriculturalSector, 1971/72-1977 7.11 Number of Wells Drilled by Governorate (1971/72-1976/77) 7.12 Fixed Prices of Selected Fruits and Vegetables, 1976-1977 7.13 Farmgate Prices of Major Crops, 1978 7.14 Crop Yields, 1976/77 7.15 Average Cost and Returns Per Acre of Major Crops, 1976 -78-

Table No.

7.16 Estimated Labor Return to CooperativeWorkers from Major Crops, 1976 7.17 EstimatedLivestock Population, 1975-1977 7.18 Total Egg Production,1970-1977 7.19 Egg and Poultry Meat Productionby the State Poultry Corporation, 1970-1977

8. FISHERIES

8.1 Fish Productionby Cooperativesand Companies,1972-1976 8.2 Total Fish Productionand Exports, 1965-1977 8.3 Fish Productionby Kind, 1969-1976 8.4 Fish Prices (Wet Fish) 8.5 Dried Fish Prices, Sixth Governorate,1978

9. INDUSTRY

9.1 Productionof Major Industries,1973-1977 9.2 Value of IndustrialOutput, 1969-1977 9.3 Total Employmentin IndustrialEstablishments, 1969-1977 9.4 Productionof the Aden Refinery, 1969-1977 9.5 Operationsof the Aden Refinery, 1970-1977 9.6 Local Cash Outlays of the Aden Refinery, 1969-1977

10. ADEN PORT

10.1 Activity in Aden Port, 1973-1977 10.2 Aden Port: Supply of PetroleumProducts by Company, 1977 10.3 Aden Port: Directly Imported and DomesticallyProduced Petroleum Products Supplied to Bunkering Ships, 1977 10.4 Movement of Goods in Aden Free Zone, 1974-1977 -79-

Table No.

11. ECONOMIC INFRASTRUCTURE

11.1 Length and Distributionof Road Network as of January 1, 1973-1978 11.2 InternationalTelecommunications Statistics, 1972-77 11.3 Telephone Statistics,1972-1977 11.4 PCCII Contracts and ImplementedWork, 1977

12. SOCIAL SECTORS

12.1 EstimatedFood Supplies Per Capita, 1968-1977 12.2 Calculationof Cost of Annual Food Basket Per Capita, 1977 12.3 1973 Populationby Sex and EducationalStatus (for persons over 10 years of age) 12.4 StatisticalIndicators on Formal Education,1964/67-1976/77 12.5 Subjects Studied at the Unity and Secondary Levels 12.6 StatisticalIndicators on Teachers Training and TechnicalEducation, 1966/67-1976/77 12.7 Higher Education,Enrollment and Faculty, 1970/71-1976/77 12.8 PDRY Students Departing for Higher EducationAbroad by Specialty and Country (1975/76and 1976/77) 12.9 Annual Number of Students Departing for Higher EducationAbroad, 1969/70-1977/78 12.10 IlliteracyPrograms, 1970-1977 12.11 Expenditureson Education,1966/67-1977 12.12 Medical and AuxiliaryHealth Staff by Type and Governorate,1977 12.13 Health Facilitiesby Governorate,1970, 1973 and 1977 12.14 Expenditureson Health, 1971/72 and 1977 12.15 Housing Sector: Planned and Actual Construction,1973/74-1977

13. PRICES

13.1 Aden Cost of Living and Wholesale Price Indices, 1970-1977 -80-

Table 1.1: ENUMERATED RESIDENT POPULATION BY AGE GROUP, SEX AND URBAN/RURAL COMPOSITION, 1973

Age Total Males Females Group Population Urban Rural Nomad Total Urban Rural Nomad Total

0- 4 290,245 44,817 89,542 11,904 146,263 43,475 87.223 13,284 143,982

5- 9 275,641 46,777 83,370 13,984 144,131 41,895 76,438 13,177 131,510

10-14 186,652 35,966 59,070 7,966 103,002 27,434 48,888 7,328 83,650

15-19 129,778 25,399 30,111 6,496 62,006 21,977 38,513 7,282 67,772

20-24 94,634 18,877 17,953 4,009 40,839 17,613 30,480 5,702 53,795

25-29 105,599 20,501 21,405 5,790 47,696 19,067 33,581 5,255 57,903

30-34 92,653 17,083 20,123 3,962 41,168 15,694 30,334 5,457 51,485

35-39 92,385 17,916 22,457 5,3.13 45,686 15,705 26,501 4,493 46,699

40-44 66,677 11,785 16,015 3,291 31,091 10,810 20,871 3,905 35,586

45-49 55,271 9,513 13,844 3,637 26,994 8,224 17,277 2,776 28,277

50-54 52,934 8,603 13,781 3,267 25,651 7,603 16,552 3,128 27,283

55-59 28,442 4,103 8,544 1,663 14,310 3,839 8,990 1,303 14,132

60-64 38,498 4,669 10,653 2,123 17,445 5,150 13,805 2,098 21,053

65-69 18,029 2,158 5,616 1,113 8,887 2,290 5,925 927 9,142

70+ 47,652 5,516 13,767 2,456 21,739 7,330 15,418 3,165 25,913

Not specified 15,185 6,488 3,519 102 10,109 786 4,144 146 5,076

TOTAL 1,590,275 280,171 429,770 77,076 787,017 248,892 474,940 79,426 803,258

Source: Central Statistical Organization; Preliminary Results of 1973 Census. -81-

Table 1.2: MANPOWER ESTIMATES, 1969-1976

(Thousands)

1969 1/ 1973 1976 1/

Total population 1,416 1,590 1,680

of which

less than 12 years old 575 648 713

over 65 years old 54 62 67

Working-agepopulation 787 880 900

of which

Incapables 68 80 88

Total manpower 719 800 812

of which

unemployedbut not seeking jobs 1/ 408 441 396

Total labor force 311 359 416

of which

unemployed2/ 47 36 17

1/ Housewives,students, retired before 65, prisoners, persons that do not need to work.

2/ Unemploymentsurvey was taken for one week only.

Source: Ministry of Planning and mission estimates. -82-

Table 1.3: EMPLOYED LABOR FORCE BY SECTOR, 1969-1976

(Thousands)

1969 1973 1976

Agricultureand fishing 138 152 181

Industry 8 20 27

Building and construction 3 15 28

Trade, restaurantsand hotels 26 25 30

Transport,storageand communications 4 14 24

Finance, insurance and real estate 2 2 2

Other services 1/ 83 95 107

TOTAL 264 323 399

1/ Includes public, social and personal services.

Source: Ministry of Planning. -83-

Table 1.4: ANNUAL AVERAGE WAGE RATES BY SECTOR, 1973 & 1976

(YD, Current Prices)

Annual Growth Rate 1973 1976 1973/76

Agricultureand fishing 66.8 73.6 3.3

Mining and quarrying 87.0 110.0 8.1

Manufacturing 229.3 242.4 1.9

Electricity,water and gas 280.3 309.2 3.3

Building and construction 138.5 243.7 20.5

Trade and touristic services 187.8 212.6 4.2

Transport, storage and c*ommunications 256.2 269.9 1.7

Finance, insuran.e and 16.5 real estate 225.0 355.5

Other services 207.1 217.3 1.6

Average for all sectors 142.3 159.0 3.8

Source: Ministry of Planning, Table 1.5 CENTRAL GOVERNMENT CIVIL WORK FORCE, 1973-1977

Year Estimates Estimated (approvedbudgetary posts) Actuals

1973-74 20,520 19,500

1974-75 22,212 21,300

1976 26,615 25,200

1977 32,183 31,087

Note: Includes temporaryworkers, but excludes military personnel.

Source: Ministry of Finance. -85-

Table 2.1: VALUE OF GROSS DOMESTIC PRODUCTION BY TYPE OF ECONOMIC ACTIVITY AT CURRENT FACTOR COST, 1973-1976

(YD Thousands)

Activities 1973 1974 1975 1976 Agriculture (plant and 17,831 18,478 19,434 20,649 livestock)

Fisheries 6,263 6,923 6,916 13,788 Domestic and joint companies (3,957) (4,460) (4,799) (7,242) Foriegn companies (2,306) (1,463) (1,117) (6,546)

Mining and quarrying 305 356 193 325

Refining 4,397 9,663 1,149 600

Manufacturing 9,493 13,017 15,431 21,656

Electricityand water 2,565 3,294 4,251 4,310

Building and construction 7,634 9,924 15,625 18,403

Commerce 16,316 20,699 20,768 24,967

Restaurantsand hotels 3,882 5,296 6,865 7,817

Transport, storage and 9,418 15,267 19,223 24,815 communications

Financing, insurance and real 5,674 7,429 8,503 9,836 estate

Business and personal services 3,881 5,062 5,906 6,186

SUBTOTAL 87,659 114,408 123,264 153,352

Governmentalservices 22,231 25,574 31,365 36,942

TOTAL 109,890 139,982 154,629 190,294

Source: Central StatisticalOrganization. -86-

Table 2.2: VALUEOF GROSS DOMESTIC PRODUCTIONBY TYPE OF ECONOMIC ACTIVITY AT CURRENT MARKET PRICES, 1973-1976

(YD Thousands)

Activities 1973 1974 1975 1976 Agriculture (plant and 18,325 18,991 19,974 21,221 livestock

Fisheries 7,178 7,120 6,869 15,594 Domestic and joint companies (4,357) (4,960) (5,325) (8,070) Foreign companies (2,821) (2,160) (1,524) (7,524)

Mining and quarrying 307 358 195 * 326

Refining 5,500 10,900 2,849 2,500

Manufacturing 9,906 14,202 17,217 24,266

Electricityand water 2,588 3,324 4,286 4,347

Building and construction 7,634 9,924 15,625 18,403

Commerce 16,406 21,134 21,324 25,723

Restaurantsand hotels 3,949 5,388 6,984 7,953

Transports,storage and 9,750 15,963 19,979 25,976 communications

Financing, insurance and real 5,684 7,457 8,532 9,852 estate

Business and personal services 3,881 5,062 5,906 6,186

SUBTOTAL 91,108 119.823 129,720 162,347

GovernmentServices 22,231 25,574 31,365 36,942

TOTAL 113.339 145,397 161,085 199,289

Custom duties 1/ 5,238 7,357 6,528 9,165

Production subsidies 2,371 2,281 1,634

Value of Domestic Productionat 118 577 150,383 165,332 206,820 Market Prices

1/ Other indirect taxes are included in figures above.

Source: Central StatisticalOrganization. -87-

Table 2.3: GROSS DOMESTIC PRODUCT AT CURRENT FACTOR COST, 1973-76

(YD Thousands)

Activities 1973 1974 1975 1976

Agriculture (plant and 11,798 12,895 13,350 14,175 livestock)

Fisheries 4,616 4,269 4,366 10,357 Domestic and joint companies (2,761) (3,173) (3,523) (5,165) Foreign companies (1,855) (1,096) (843) (5,192)

Mining and quarrying 75 150 150 177

Refining 3,583 8,835 549 --

Manufacturing 3,919 4,878 6,078 9,268

Electricityand water 1,282 1,015 1,927 2,004

Building and construction 4,293 5,644 8,684 10,368

Commerce 13,101 15,015 15,801 19,141

Restaurantsand hotels 1,947 2,656 3,443 3,812

Transport, storage and 5,990 8,262 9,549 13,480 communications

Financing, insuranceand real 5,259 6,832 7,413 8,396 estate

Business and personal services 2,640 3,442 4,016 4,207

Interest -1,550 -3,283 -4,406 -4,525

SUBTOTAL 56,953 70,610 70,920 90,860

Governmentalservices 18,559 16,541 18,273 21,472

GROSS DOMESTIC PRODUCT AT 75,512 87,151 89,193 112,332 'AU'lUK WS'u1

Source: Central StatisticalOrganization. - 88 -

Table 2.4: GROSS DOMESTIC PRODUCT AT CURRENT MARKET PRICES, 1973-76

(YD Thousands)

Activities 1973 1974 1975 1976

Agriculture (plant and 12,292 13,408 13,890 14,747 livestock)

Fisheries 5,531 5,466 5,299 12,163 Domestic and joint companies (3,161) (3,673) (4,049) (5,993) Foreign companies (2,370) (1,793) (1,250) (6,170)

Mining and quarrying 77 152 152 178

Refining 4,686 10,072 2,249 1,900

Manufaturing 4,332 6,063 7,864 11,878

Electricity and water 1,305 1,045 1,962 2,041

Building and construction 4,293 5,644 8,684 10,368

Commerce 13,191 15,450 16,357 19,897

Restaurants and hotels 2,014 2,748 3,562 3,948

Transports, storage and 6,322 8,958 10,305 14,641 communications

Financing, insurance and real 5,269 6,860 7,442 8,412 estate

Business and personal services 2,640 3,442 4,016 4,207

Interest -1,550 -3,283 -4,406 -4,525

SUBTOTAL 60,402 76,025 77,376 99,855

Government Services 18,559 16,541 18,273 21,472

TOTAL 78,961 92,566 95,649 121,327

Custom duties 1/ 5,238 7,357 6,528 9,165

Production subsidies -- -2,371 -2,281 -1,634

GROSS DOMESTIC PRODUCT AT 84,199 97,552 99,896 128,858 MAKKET K1KCLLKb

1/ Other indirect taxes are included in figures above.

Source: Central Statistical Organization. - 89 -

Table 2.5: GROSS FIXED INVESTMENTAT CURRENT PRICES BY PUBLIC AND PRIVATE SECTOR, 1969-76 (YD Thousands)

Public Sector Year Development Budget Munici- Other/1 Subtotal Private Total Plans palities Sector/2

1969 _ 202 50 28 280 700 980 1970 _ 156 55 70 281 760 1,041 1971 3,072 241 45 298 3,656 800 4,456 1972 7,800 402 46 643 8,891 700 9,591 1973 11,695 298 134 864 12,991 600 13,591 1974 18,590 512 136 894 20,132 1,000 21,132 1975 24,267 884 162 1,354 26,667 1,500 28,167 1976 37,225 1,483 181 1,300 42,189 1,800 43,989

/1 Includes estimates of investment of public sector outside the plan and the estimatedvalue of foreign aid received as equipment. /2 Estimates include in particular housing of individuals.

Source: Ministry of Planning. - 90 -

Table 3.1. SUMMARY BALANCE OF PAYMENTS,1973-77

(US $ Millions)

1973 1974 1975 1976 1977

Trade Deficit -106 -166 -157 -241 -295 Domestic exports, f.o.b. /1 14 8 8 26 29 Retained imports, c.i.f. /1 -120 -174 -165 -267 -324

Invisibles, net 54 70 76 145 205 Workers' remittances 33 41 56 115 180 Others 21 29 20 30 25

Balance on goods and services -52 -96 -81 -96 -90

Official transfers - 1 10 46 55

Official medium and long-term capital net 25 48 31 58 68 Gross disbursement 25 48 32 59 69 Repayments - - -1 -1 -1

Misc4ellaneous Capital, net/2 23 12 16 -21 7

Overall balance 4 -35 -24 13 40

Net foreign assets 74 39 15 2 42 Bank of Yemen's gross reserves 76 63 53 82 96 Use of IMF credit - -11 28 -44 -44 Commercial bank -2 -13 -10 -36 -10

/1 Net of re-exports. /2 Including errors and omissions.

Source: Bank of Yemen - 91 -

Table 3.2; BALANCE OF PAYMENTS,1973-77 1/

(US $ Millions)

1973 1974 1975 1976 1977

Trade Deficits -105.85 -166.46 -157.18 -241.57 -295.22 Exports, f.o.b. 24.94 17.40 19.72 44.37 51.04 (Domestic exports) (13.92) (7.83) (8.41) (25.52) (29.00) (Re-exports) (11.02) (9.57 (11.31) (18.85 (22.04) Imports, c.i.f. -130.79 -183.86 -176.90 -285.94 -346.26 (Petroleum for domestic (-9.28) (-25.81) (-20.01) (-52.20) (-58.00) consumption) (Other imports) (-121.51) (-158.05) (-156.89) (-233.74) (-288.26)

Services and transfers. net 53.94 70.18 75.98 145.58 204.74 Shipping, aviation and 5.22 2.61 3.48 4.93 7.25 insurance Investment income 4.06 6.96 2.90 6.38 7.25 Other services 11.89 12.76 15.08 16.53 17.69 Government n.i.e. -0.58 6.67 -1.45 2.32 -6.96 Workers' remittances 33.35 41.18 55.97 115.42 179.51

Balance on goods and services -51.91 -96.28 -81.20 -95.99 -90.48

Official transfers 0.29 0.87 10.15 46.40 55.10

Current account balance. -51.62 -95.41 -71.05 -49.59 -35.38

Official medium and lont 24.65 47.85 31.32 58.00 67.86 term capital Drawings on loans received 24.65 48.14 31.90 59.45 69.31, Repayment of loans - -0.29 -0.58 -1.45 -1.45

Miscellaneous capital and net 22.91 12.18 15.37 -21.17 7.25 errors and omissions Central government - - - - - investment Local government assets 2.03 - - - - Claims on nationalized banks - - - - - Private long-term capital 1.45 4.64 - - - Private short-term capital 20.01 15.95 11.02 - - Net errors and omissions -0.58 -8.41 4.35 -21.17 7.25

Overall Balance -4.06 -35.38 -24.36 -12.76 39.73

Monetary movements (increase 4.06 35.38 24.36 12.76 -39.73 in assets) Deposit money banks 5.51 10.73 -2.90 26.10 -26.39 Monetary gold - - - - -0.58 SDRs - 4.93 0.58 0.29 -0.87 Reserve position in fund - 4.64 - - - Foreign exchange reserves 1.45 3.77 8.99 -29.00 -11.89 of monetary authority Government foreign assets - - - - Use of IMF credit - 11.31 17.69 15.37

/1 Treating the foreign c9mpanies as non-resident.

Source: Bank of Yemen - 92 -

Table 3.3: BALANCE OF PAYMENTS, 1973-77 _/

(YD Millions)

1973 1974 1975 1976 1977

Trade deficits -36.5 -57.4 -54.2 -83.3 -101.8 Exports, f.o.b. 8.6 6.0 6.8 15.3 17.6 (Domestic exports) (4.8) (2.7) (2.9) (8.8) (10.0) (Re-exports) (3.8) (3.3) (3.9). (6.5) (7.6) Imports, c.i.f. -45.1 -63.4 -61.0 -98.6 -119.4 (Petroleum for domestic (-3.2) (-8.9) (-6.9) (-18.0) (-20.0) consumption) (Other imports) (-41.9) (-54.5) (-54.1) (-80.6) (-99.4)

Services and transfers, net 18.6 24.2 26.2 50.2 70.6 Shipping, aviation and 1.8 0.9 1.2 1.7 2.5 insurance Investment income 1.4 2.4 1.0 2.2 2.5 Other services 4.1 4.4 5.2 5.7 6.1 Government, n.i.e. -0.2 2.3 -0.5 0.8 -2.4 Workers' remittances 11.5 14.2 19.3 39.8 61.9

Balance on goods and services -17.9 -33.2 -28.0 -33.1 -31.2

Official transfers 0.1 0.3 3.5 16.0 19.0

Current account balance -17.8 -32.9 -24.5 -17.1 -12.2

Official medium and long- 8.5 16.5 10.8 20.0 234 term capital Drawings on loans received 8.5 16.6 11.0 20.5 23.9 Repayment of loans _ -0.1 -0.2 -0.5 -0.5

Miscellaneous capital and net 7.9 4.2 5.3 -7.3 errors and omissions Central government - - - _ investment Local government assets 0.7 _ _ _ _ Claims on nationalized banks - - - - - Private long-term capital 0.5 1.6 - _ _

Private short-term capital 6.9 5.5 3.8 - - Net errors and omissions -0.2 -2.9 1.5 -7.3 2.5

Overall balance -14 -12.2 -8.4 -4.4 13.7

Monetary movements (increase 1.4 12.2 8.4 4.4 -13.7 in assets) Deposit money banks 1.9 3.7 -1.0 9.0 -9.1 Monetary gold - - - - -0.2 SDRs - 1.7 0.2 0.1 -0.3 Reserve position in fund - 1.6 - - - Foreign exchange reserves -0.5 1.3 3.1 -10.0 -4.1 of monetary authority Government foreign assets - _ _ _ _ Use of IMF credit 3.9 6.1 5.3 -

/1 Treating the foreign companies as non-resident.

Source: Bank of Yemen. - 93 -

Table 3.4: NET FOREIGN ASSETS, 1972-1977

(YD Millions)

End of December 1972 1973 1974 1975 1976 1977

Bank of Yemen (net) 25.71 26.24 17.76 8.89 13.55 17.72 Foreign assets 25.71 26.24 21.70 18.45 28.33 34.71 Gold 0.25 0.25 0.25 0.25 0.25 0.42 IMF gold tranche 1.56 1.56 - Holdings of SDRs 3.26 3.25 1.53 1.34 1.22 1.50 Foreign exchange 20.64 21.18 19.92 16.86 26.86 32.79 Foreign liabilities - -3.94 -9.56 -14.7.8 -16.99 Use of IMF credit - - -3.94 -9.56 -14.78 -15.45

Other - -1.54

National bank of 1.06 -0.81 -4.51 -3.54 -12.56 -3.42 Yemen (net) Foreign assets 3.16 2.88 1.95 9.16 10.28 23.68 Foreign liabilities -2.10 -3.69 -6.46 -12.70 -22.84 -27.10

Government 0.06 0.03 0.02 0.01 0.01 0.01

TOTAL (net 26.83 25.46 13.27 5.36 1.00 14.31

Source: Bank of Yemen - 94 - Table 3.5: COMPOSITION OF EXPORTS AND RE-EXPORTS, 1973-1977

(YD Thousands)

1973 1974 1975 1976 1977

Food and live animals 2577 2,83' 2,592 5,640 .527 Dried fish 225 241 182 123 23 Fresh fish 1,382 1,997 1,472 3,907 5,844 Rice - _ _ Wheat and wheat flour 3 - Refined sugar 231 - - - Coffee 495 380 669 1,170 1,209 Tea 1 _ - Other 243 214 266 440 451

Beverages and tobacco 57 38 65 112 183

Crude materials (except 3,044 970 1,021 4,301 1,963 fuel) Hides and skins 328 289 226 222 179 Cotton linters and seeds 2,139 231 472 3,565 1,263 Salt 117 181 52 99 193 Metal scrape 108 73 15 Other 352 196 256 415 328

Petroleum products 131 54 24 5,262 5,807

Animal and vegetable oils 2 - 6 34 8

Chemicals 57 40 24 28 4

Manufactured goods 561 250 75 39 18 Textiles 383 139 13 3 - Other 178 111 62 36 18

Machinery and transport 7, 32 21 6 230 ecuipment Passenger cars 13 6 5 2 _ Trucks 3 217 Other 61 26 16 4 13

Miscellaneous manufactured 273 170 59 70 30 articles Clothing 191 89 22 13 11 Footwear 8 2 1 - - Other 74 79 36 57 19

Unclassified items 104 _ 19 4 3

TOTAL 6,883 4,386 3,906 15,496 15,773

Memorandum Re-exports 2,095 1,088 1,050 6,786 Food and beverages 678 376 732 1,116 Industrial supplies 782 487 229 346 Consumer goods 340 148 28 9 Other 295 77 61 5,265

Source: Central Statistical Organization. - 95 -

Table 3.6: DIRECTION OF EXPORTS, 1973-1977

(YD Thousands)

1973 1974 1975 1976 1977

Arab Countries, of which: 1,341 773 490 548 551 Oman 3 - - - - Saudi Arabia 44 33 26 202 341 United Arab Emirates 65 64 147 113 83 Egypt 6 5 - 6 25 Yemen Arab Republic 225 98 124 78 50 Somaila 824 272 67 26 29

Socialist Countries of which: 1,358 227 214 655 447 Mainland China 1,312 1 - 473 2

Industrial Countries, of which: 3,143 2,006 2,011 6,389 6,373 United States 437 88 60 139 405 United Kingdom 598 74 151 236 113 Germany, Federal Rep. of 274 114 192 790 5 Italy 186 183 218 1,211 591 Canada 9 12 - - - Japan 1,257 1,404 1,298 3,593 5,160

Other Developed Countries 3 - - 75 -

Asia, of which: 620 930 947 2,155 860 Sri Lanka 188 141 150 907 3 India 16 7 8 12 1 Singapore 259 745 755 1,079 628

Africa, of which: 411 398 220 487 47 Djibouti 181 163 135 272 47 Nigeria 1 - - - -

TOTAL 6,876 4,334 3,882 10,309 8,279

1/ Nonpetroleum exports only.

Source: Central StatisticalOrganization. - 96 - Table 3.7: COMPOSITION OF IMPORTS, 1973-1977

(YD Thousands)

1973 1974 1975 1976 1977

Food and live animals 16,709 25,307 21,940 22,235 28,450 Live animals 790 552 820 1,504 1,746 Ghee 775 1,833 1,912 1,610 3,542 Wheat and wheat flour 3,566 7,250 3,606 5,398 6,051 Rice 2,401 5,841 4,673 3,072 3,315 Refined sugar 2,685 4,291 4,757 2,349 2,882 Coffee 261 355 794 1,277 502 Tea 1,343 673 923 1,531 2,223 Spices 574 567 472 457 966 Other 4,314 3,945 3,983 ,037 7,223

Beverages and tobacco 1,118 1,098 955 1,242 1,312

Crude materials, inedible, (except fuel) 1,393 2,591 1,970 2,531 2,928 Hides and skins 7 51 47 14 .-II Sesame seeds 829 1,292 666 1,270 553 Wood 296 914 861 978 1,840 Other 261 334 396 269 524

Petroleum products 3,157 14,428 11,641 21,189 22,082

Animal and vegetable oils 328 896 683 730 1.222

Chemicals 1616 2,_447 2,785 3,221 3,488

Manufactured goods classified chiefly by materials 6,105 8,615 10,602 11,368 15,182 Textiles 2,608 3,016 1,363 1,462 3,428 Cement 410 1,424 959 974 844 Other 3,087 4,175 8,280 8,932 10,910

Machinery and transport equipment 2,958 8,257 10,316 20,103 42,231 Machinery 1,263 3,113 4,490 8,689 5,829 Passenger vehicles 222 340 273 1,149 1,977 Trucks 91 1,182 1,324 2,623 10,067 Other 1,382 3,622 4,229 7,642 24,358

Miscellaneous manufactured articles 2,598 1,985 1,198 2,393 4,434 Clothing 943 646 288 517 1,480 Footwear 248 200 161 372 364 Other 1,407 1,139 749 1,504 2,590

Unclassified items 18 40 54 95 Qat 7 80 Other 18 40 47 15

TOTAL 36,000 65,664 144 85,107 121,329

Source: Central Statistical Organizacion - 97 -

Table 3.8: ORIGIN OF IMPORTS/1, 1973-77

(YD Thousands)

1973 1974 1975 1976 1977

Arab countries,of which: 3,496 3,179 3,012 3,674 1,967 Iraq 1,043 495 341 6Th 208 Kuwait 61 92 178 219 58 United Arab Emirates 273 24 63 27 15 Egypt 131 53 26 49 71 Yemen Arab Republic 340 653 1,076 1,270 561 Somalia 884 688 859 121 222

Socialist countries, 7,013 11.531 9.843 12.114 13,626 of which: Mainland China 3,884 5,129 4,470 4,374 2,976 Czechoslovakia 691 44 113 664 286 Germany, Dem. Rep. of 1,359 1,233 982 602 1,465 U.S.S.R. 549 4,218 3,419 3,503 6,023

Industrialcountries 14,701 22,842 26,496 34,052 59,896 of which: United States 148 4,066 1,248 322 3,508 United Kingdom 4,332 3,647 8,649 8,450 11,985 Denmark 609 1,322 858 3,484 1,731 France 710 608 1,890 2,538 1,189 Germany, Fed. Rep. of 2,332 3,506 813 1,724 2,579 Italy 547 1,413 1,229 1,782 9,010 Netherlands 1,825 3,479 3,049 3,321 6,350 Japan 3,319 3,818 4,707 9,390 21,166 Other developed countries, 132 128 350 3,387 6,535 of which: Australia 84 65 238 3,149 5,615

Latin America 1 483 1,049

Asia, of which: 5,236 10,303 8,098 7,256 13,499 Sri Lanka 434 354 120 63 2,223 Hong Kong 807 561 368 735 1,702 India 1,354 5,038 2,931 2,409 2,469 Iran 2 Pakistan 463 171 490 154 457 Thailand 581 3,169 3,035 2,154 3,025 Singapore 1,595 953 1,144 1,657 3,469

Africa, of which: 3,035 4,152 3,917 4,597 2,775 Ethiopia 459 1,267 670 1,368 477 Kenya 1,841 2,040 2,154 1,987 1,673

TOTAL 33,613 52,135 52,199 65,080 99,345

/1 Non-petroleumimports only. Source: Central StatisticalOrganization. Table 4.1: OUTSTANDING EXTERNAL DEBT, 1972-1977

(US $ Millions)

1972 1973 1974 1975 1976 1977

Total Total Total Total Total Total Disb. inc. Disb. inc. Disb. inc. Disb. inc. Disb. inc. Disb. inc. undisb. undisb. undisb. undisb. undisb. undisb.

International organizations 1.45 2.61 2.03 6.96 3.19 37.12 8.12 84.97 24.65 92.80 37.12 178.93 Kuwait Fund for Economic 0.87 1.16 0.87 1.16 1.16 15.37 3.48 30.45 11.02 30.45 15.66 39.73 Development Arab Fund for Economic ------10.73 0.87 24.07 2.61 24.07 4.64 54.81 and Social Development Saudi Fund for Economic ------34.80 Development Abu Dhabi Fund for ------8.99 Economic Development X I. D. A. 0.58 1.45 1.16 5.80 2.03 11.02 3.77 30.45 11.02 38.28 14.50 38.28 e OPEC Special Fund ------2.32 2.32

Government loans 21.17 49.88 45.82 68.15 77.72 87.87 100.34 133.69 137.75 186.47 196.04 244.76 Bulgaria ------0.29 1.45 0.29 1.74 4.06 8.12 13.63 15.37 People's Republic of China 8.41 6.09 16.24 15.08 20.88 21.17 32.77 36.83 40.31 42.92 59.45 59.45 Czechoslovakia ------0.58 3.48 0.87 3.48 3.77 5.80 4.93 8.99 Denmark 1.74 1.74 1.74 1.74 1.74 1.74 1.74 1.74 1.74 1.74 4.06 4.06 German Democratic Republic 3.48 3.77 5.22 5.22 8.41 8.70 9.28 12.47 11.02 16.24 14.50 16.53 Hungary ------0.87 0.87 1.45 1.16 1.45 1.45 1.45 Iraq -- 11.60 9.28 11.60 13.63 13.63 13.63 14.79 18.56 24.94 18.56 24.94 Libya -- 16.82 1.74 16.82 11.89 16.82 12.76 16.82 12.76 16.82 13.92 16.82 U. S. S. R. 7.54 9.86 11.60 17.69 20.30 20.01 28.13 44.37 44.37 68.44 65.54 97.15

Other 3.77 5.22 4.64 7.25 6.96 7.83 7.25 - 7.83 7.25 7.83 7.5477. 83

TOTAL 26.39 57.71 52.49 82.36 87.87 132.82 115.71 226.49 169.65 287.10 240.70 431.52

Source: Bank of femen Table 4.2: OUTSTANDING EXTERNAL DEBT, 1972-1977

(YD Millions, end period)

1972 1973 1974 1975 1976 1977

Total Total Total Total Total Total Disb. inc. Disb. inc. Disb. inc. Disb. inc. Disb. inc. Disb. inc. undisb. undisb. undisb. undisb. undisb. undisb.

International organizations 0.5 0.9 0.7 2.4 1.1 12.8 2.8 29.3 8.5 32.0 12.8 61.7 Kuwait Fund for Economic 0.3 0.4 0.3 0.4 0.4 5.3 1.2 10.5 3.8 10.5 5.4 13.7 Development Arab Fund for Economic and ------3.7 0.3 8.3 0.9 8.3 1.6 18.9 Social Development Saudi Fund for Economic ------12.0 Development Abu Dlhabi Fund for ------3.1 Economic Development I. D. A. 0.2 0.5 0.4 2.0 0.7 3.8 1.3 10.5 3.8 13.2 5.0 13.2 OPEC Special Fund ------0.8 0.8 Government loans 7.3 17.2 15.8 23.5 26.8 30.3 34.6 46.1 47.5- 64.3 67.6 84.4 Bulgaria ------0.1 0.5 0.1 0.6 1.4 2.8 4.7 5.3 People's Republic of China 2.9 2.1 5.6 5.2 7.2 7.3 11.3 12.7 13.9 14.8 20.5 20.5 Czechoslovakia ------0.2 1.2 0.3 1.2 1.3 2.0 1.7 3.1 Denmark 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6 1.4 1.4 German Democratic Republic 1.2 1.3 1.8 1.8 2.9 3.0 3.2 4.3 3.8 5.6 5.0 5.7 Hlungary ------0.3 0.3 0.5 0.4 C.5 0.5 0.5 Iraq -- 4.0 3.2 4.0 4.7 4.7 4.7 5.1 6.4 8.6 6.4 8.6 Libya -- 5.8 0.6 5.8 4.1 5.8 4.4 5.8 4.4 5.8 4.8 5.8 U. S. S. R. 2.6 3.4 4.0 6.1 7.0 6.9 9.7 15.3 15.3 23.6 22.6 33.5 Other 1.3 1.8 1.6 2.5 2.4 2.7 2.5 2.7 2.5 2.7 2.6 2.7

TOTAL 9.1 19.9 18.1 28.4 30.3 45.8 39.9 78.1 58.5 99.0 83.0 148.8

Source: Bank of Yemen Table 5.1: LIST OF PUBLIC SECTOR ENTITIES AS OF MARCH, 1978

Financial institutions Activities Supcrvisinpin stry

i. Bsnk of Yen'nn Certral 'tank Aut onomnou 2. ?]2tionn1 B-3nkof Yemen C'mmsrcijl ianking bihiatvy of f4rentc 3. Nationp.1 Company for Insurarce Reinsur.nce nnd F!r', ecctderz., motor vehicle insurance hinctr of Fin.ns

M.-rkeCti, a Tradir,gCorporations

4. V'.tlenI (omr,pony for llcmr T-ade Distriru;tion of most consumer goods and ^apital 'te;ns :(irist-v of Tl-ad2 & Sup, ly 5. 4ational Company ior Foreign Trade Commission rf,nc (n;- impoct and export of ;xClTrand Ministry of ,rad-- & Surpp" other rarkrting ngencies c. Victory Ca:.vpany for Free Tra;d Import andl Recail rradc of duty fren goods, luxury Ministry o'' Tznci- & Supply goods annd ship chandiering 7. Pttblic Corporation for Mcarketing Fruits and Distribution of fruita and vegetables -Iinist-y of t.vr-,uljture V7getabi es FuolicF. rorporat,on for neaL lorketing Wholesele and retail distribution of meat I-itrstry of A-rieulture 9 PatlonGl Drug Company Inport, procensing and distribution of drugs and ~~0.flo'~~e~ticDeparunort PIayi~~etir.~for of Fish- ~cosrretics& 2/ Ministry of helciIth !0. DepArtw.ert for D)-rstic Nalarlietirg of Fish-/ -/ Distribution cf Fish in let, 2nd, 3rd Governorates Ministrv of rh-, e;ics 11. Der;rt,rent for Fish E:xport- Expcrt of Lobster, mainly Ministry of Fisherie3 12. Yemiz(! Notiona Cil Company3 Impoit and distribution of petroleum products

T1ans~2-rt and Cormirication

13. IYrmcn Pcits and S,ippJrp, Corporation YPSC supervises the three following corperations: F inistry of Cor,sauricstion- 14. Port of L.den Authority 4 Port operations Ministrv of C,rimunicatic irr 15. Niotional ShLpntir Cocainay- SteveeorIrg, shipping and shipping agents' activitics Mi nist.7 of CoosnuricatIone 16. r:ationul Docky.irdfs Coc.pany 5 hiip repairirg Minist-y of Coomunicellons 17. Public Corporovions fcr Land Transport- Trucking ant) btising operations Ministry of Communiications 0 1R. benocretic Yem2n iirlines (ALYEliDA) Domestic and internatioral civil airline fiiriistry of Cornunications I 1'9. Telephone Company Domestic and international civil FiinisLry of Comounications

F,8nuf&ctrin;; and Construction 6/ 20. Aden Refinery Oil ltefining Ministry of Industry- 21. i'ublic Corporation for Electric Power Electric power generation and transmission Ministry of Industry 22. Public Corporation for W.ater Supply Urban water production and distribution (in 5 cities) Ministry of Industry 23. PublIc Corporation for Soft Drinks7/ Manufrcturing of bottled soft drinks Ministry of Indu)stry 24. Public Corporation for SaIlt 7 Production of Salt Ministry of Industry 25. Public Corporation for DAiry Producta- rroduction, processing, import and distribution of milk Ministry of Industry 25. Puiblic Corporation for Poultry Poultly meait and egg production Ministry of Agriculture 27. Textile Factory Cloth procduction Miis-try of Indtistry 28. Tannery Factory 'fanning Ministry of Industry 29. Footwear Factory L.eatlher et0ivt and sanclnls production Ministry of Ilidustry 20. CuothinrSandas acor Seiu~nt Garmnts Ministry of Industry 31. Rutnhler Sandals Fa3ctory Rubber Sanddal Production Ministry of Industry 32. Agricultuiral Tools Factory lhand Tools Ministry of Industry 33. Spareparts Factory Mechanical spnreparts (for egricultural machinery) Mlinistry of Industry 34. Tomato Paste Factory Canned tomato pa5te menufacttiring Miiiinitry of Industry Table 5.1 (Continued)

35. Cottonseed Oil Factory7/ Cottonseed oil and cake production Ministry of Industry 36. Flour Mill Wheat milling Ministry of Irdustry 37. Bakery Ministry of Industry 38. Canned Fish Factory Ministry of Fisheries 39. Fishmeal Factory Ministry of Fisheries 40. Oxygen and Acetyline Gas Factory Ministry of Industry

41. Plastics Factory Plastic utensils manufacturing Ministry of Indu3cry 42. Printing and Publishing Company Ministry of Broadcasting 43 Building Corporations5/ Housing Ministry of Construction 3-Public Corporation for Construction and 44. Industrial Installations 45. Public Corporation for Carpentry and Boat Building Ministry of Construction

Other Services

46. Public Corporation for Tourism Management of hotels, clubs and tour buses Ministry of Culture & Tourism 47. Public Corporation for Cinema Management of movie theaters and film distribution Ministry of Culture ambd

Agriculture and Fishing Tourism

48. Large Fishing Units DepartmentI-- Deep sea fishing Ministry of Fisheries 40). Small rishing Units Department- 8/ Coastal fiahing Ministry of Fisheries 50. State Farms and Machinery Renting Stations- Ministry of Agriculture

1/ Fishing and fish marketing, previously handled by the Public Corporation for Fish Wealth within the purview of the Ministry cf Agriculture, have been entrusted to the Ministry of Fisheries established in the enci of 1977. The new ministry is made up of four financially independent production and marketing units.

2/ Fish continues to be marketed by private traders in the 4th, 5th ard 6th Governorates. A dry-fish production unit has been integrated into this department in 1978.

3/ YNDC also has an exploration department, but its operations are harp.predby lack of proper equipment and exploration is carried out by foreign ccmpanies.

4/ NSC is also managing Aden Coasters, a unit operating a small fleet of three coasters. Aden Coasters shall become an autonomous entity and its fleet expanded in the near future.

5/ One autonomous corporation has been established in each Covernorate.

6/ Other entities within the pu-iiew of the Ministry of Industry are "mixed" companies (cigarettes, matches, perfumes, paints, batteries and aluminium utensils) and pri ate companies (plastic sandals, foarm rubber, knitwear, garments, mirrors, ice cream, paper bags, leather belts and bags).

7/ A new production ut is under construction.

8/ Thirty-eight units. - 102 -

Table 5.2: SUMMARYOF GOVERNMENTFINANCES, 1974/75-19781/

(YD Millions)

Fiscal Year 1974/75 Apr-Dec 1976 1977 1975

Total Government Budgetary Resources 23.87 17.32 31.99 40.09 Current Revenues 19.22 14.25 25.64 33.06 Development Revenues 2.49 1.45 4.59 5.22 Self-financing by firms and corps. 2.16 1.62 1.76 1.81

Public Sector Current Expenditures 27.61 25.55 39.15 44.49

Revenue Deficit -3.74 -8.23 -7.16 -4.40

Public Sector Development Outlays 20.67 19.12 39.21 56.95

Overall Deficit -24.41 -27.35 -46.37 -61.35

Financing of Deficit 24.41 27.35 46.37 61.35 Domestic Financing 11.63 12.47 17.93 17.88 Banking System 11.91 10.09 16.80 16.88 (Government) (9.41) (9.30) (14.68) (10.83) (Public Entities) (2.50) (0.79) (2.12) (6.05) Other Assets and Accounts, Net -0.28 2.38 1.13 1.00 External Financing 12.78 14.88 28.44 43.47

Note: The fiscal year was April 1-March 31, until March 31, 1975, when it became April 1-December 31, 1975; and thereafter is on a calendar year basis. l/ Details of Revenues and Expenditures of Special Funds (Stabilization Fund, Martyrs Fund, etc.) are not available in sufficient detail. Their operations are, therefore, summarized in the item "other assets and accounts, net".

Source: Tables 5.3, 5.4, 5.6, 5.7. - 103 -

Table 5.3: CENTRAL G0VERN±iENTREVENUES, 1974/75-1978

(YD Thousands)

(Apr-Dec) Fiscal Year 1974/75 1975 1976 1977 1/

I. Total Current Revenues 19,216 14,252 . 25,640 33,063 Direct Taxes 5,466 4,539 7,423 8,709 Corporate Income Tax, of which: 3,787 3,319 5,569 6,586 Public Sector Entities (2,378) (2,727) (5,295) (5,800) Individual Income Tax 253 222 191 337 Wage & Salary Taxes 833 602 881 930 Defense Tax 593 396 782 856

Indirect Taxes 9,996 7,569 12,807 19,202 Import Duties 5,691 3,852 6,355 11,045 Cotton Tax 26 23 146 180 Excise Tax 3,200 2,750 4,760 6,217 Stamp Duties 532 480 927 1,240 Others 547 464 619 511

3,754 2,144 5,410 5,152 Sales of and Other Revenue from Gov't Property 281 239 244 273 Public'Corporations Profit Transfers for Ordinary Budget 1,239 785 2,400 2,700 Miscellaneous Departmental Revenue 2,234 1,120 2,766 2,179

II. Development Revenues 2,493 1,454 4,592 5,220 Contribution from Salaries of Public Servants for Dev't Budget 394 571 689 720 Public Corporation Profit Transfers for Dev't Budget 2,099 883 3,903 4,500

III. Price Stabilization Fund

Revenues . 688 521 901 1,395 5% of Public Entities Income Tax Collection (119) (136) (265) (290) 10% of Import Duties Collection (569) (385) (636) (1,105)

TOTAL REVENUES 22,397 16,227 31,133 39,678

Memorandum Item Contribution by public sector entities 5,716 4,395 11,598 13,000

1/ Provisional

Source: Ministries of Finance and Planning. - 104 -

Table 5.4: CENTRAL GOVERNMENT ORDINARY EXPENDITURES, 1974/75-1978

(YD Millions)

Apr-Dec FY74/75 FY75 FY76 FY77

By Economic Category 27.61 25.55 39.15 44.49 Wages and salaries 15.12 13.40 20.24 23.52 Purchases of goods & services 11.42 11.25 16.78 18.75 Transfers 1.07 0.90 2.13 2.22 Pensions (0.34) (0.31) (0.38) (0.44) Subventions to local author. (0.18) (0.14) (0.15) (0.18) Repayments of public debt (0.02) (0.01) (0.05) (0.13) (principal) Interest on public debt (0.25) (0.20) (0.30) (0.48) Subsidies to economic (0.09) (0.08) (0.22) (0.30) organizations Financial contribution to (0.02) (0.01) (0.54) (0.22) public entities Others (0.17) (0.15) (0.49) (0.47)

By OrganizationalUnit General administration 3.52 3.27 5.82 5.63 Defense and security 13.19 12.10 17.13 18.93 Local administration 0.55 0.47 0.64 1.22 Public works & communications 1.16 0.92 1.46 0.77 Finance and economy 1.24 1.26 2.72 3.89 Health 1.50 1.41 2.24 2.45 Education and guidance 4.49 4.29 6.33 8.26 Agriculture 0.60 0.46 0.85 0.93 Pensions 0.34 0.31 0.38 0.44 Others 1.02 1.06 1.58 1.97

Source: Ministry of Finance. Table 5.5: PLANNED AND ACTUAL EXPENDITIJRESUNDER THE FIRST FIVE YEAR PLAN, BY SECTOR

(YD Millions)

Planned (Revised Targets) Actuals Apr-Dec Total to Apr-Dec Total to 1974/75 1975 1976 1977 1977 1974/75 1975 1976 19771/ 1977

Industry 6.13 5.11 4.67 6.16 22.07 5.42 3.50 4.59 4.19 17.70 Agriculture and Fisheries 12.26 13.06 16.30 23.73 65.35 8.0i 7.12 16.30 18.56 49.99 Communications and Works 6.38 6.60 10.63 21.82 45.43 4.67 4.08 10.38 15.42 34.55 Geological and Mineral Surveys 0.47 1.02 4.80 6.85 13.14 0.31 0.78 2.22 5.75 9.06 Education 1.58 3.19 3.51 5.98 14.26 0.69 1.19 1.83 3.11 6.82 Health 0.73 0.59 0.88 2.46 4.66 0.38 0.28 0.38 0.77 1.81 Housing and Local Gov't 1.14 3.08 2.57 5.63 12.42 0.69 1.56 1.88 4.13 8.26 Other Social Services 1.07 2.41 2.75 7.07 13.30 0.49 0.61 1.63 5.02 7.75

[QTAL 29.76 35.06 46.11 79.70 190.63 20.66 19.12 39.21 56.95 135.94

(Percentage)

Industry 20.6 14.6 10.1 7.9 11.6 26.3 18.3 11.7 7.4 13.0 Agriculture and Fisheries 41.2 37.2 35.3 29.8 34.3 38.8 37.2 41.6 32.6 36.8 Communications and Works 21.4 18.8 23.1 27.2 23.8 22.6 21.3 26.5 27.1 25.4 Geological and Mineral Surveys 1.6 2.9 10.4 8.5 6.9 1.5 4.1 5.7 10.1 6.7 Education 5.3 9.1 7.6 7.5 7.5 3.3 6.2 4.7 5.5 5.0 Health 2.5 1.7 1.9 3.1 2.4 1.8 1.5 0.9 1.3 1.3 Housing and Local Gov't 3.8 8.8 5.6 7.1 6.5 3.3 8.2 4.8 7.2 6.1 Other Social Services 3.6 6.9 6.0 8.9 7.0 2.4 3.2 4.1 8.8 5.7

TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

I/ Provisional.

Source: Ministry of Planning. Table 5.6: PLANNED AiD ACTUAL INVESTMENT UNDER TIHE FIVE-YEAR PLAN, BY SOURCE OF FINANCE

(YD Thousands)

Planned (Revised Targets) Actuals Total to Total to Fiscal Year 1974/75 1975 1976 1977 1977 1974/75 1975 1976 19772/ 1977

Development Ftnd, of 14,494 22,425 26,243 45,975 109,137 9,572 12,277 21,880 33,043 76,772 wlhichexternal 1/ 12,158 20,080 22,263 42,765 97,266 7,044 10,813 16,154 27,823 61,834

Banking System 3,598 1,952 2,299 5,628 13,477 2,499 791 2,117 6,047 11,454

Self-Financing by Economic Entities 3,036 2,716 1,966 3,764 11,482 2,156 1,616 1,759 1,806 7,337 o

External Project Financing 8,631 7,971 15,697 24,338 56,637 6,441 4,438 13,455 16,050 40,384

Total, of which 29,759 35,064 46,205 79,705 190,733 20,668 19,122 39,211 56,946 135,947 exLernial 20,769 28,051 37,960 67,103 153,903 13,485 15,251 29,609 42,982 101,333

1/ External sources of the Fund are assumed to be the difference between whiathave been spent by the Fund and supplied by dor!esticsources.

2/ Provisional.

Source: Ministry of Planning Table 5.7: DEVELOPMENT FUND SOURCES OF FINANCE, 1974/75-1977

(YD Thousands)

Planned (Revised Targets) Actuals Apr-Dec Total to Apr-Dec Total to Fiscal Year 1974/75 1975 1976 1977 1977 1974/75 1975 1976 1977/1 1977

External Sources 9,863 13,543 11,417 10,765 45,588 21,815 721 18,156 18,235 58,927

Contribution from Yemenis 43 59 -- -- 102 117 26 1 __ 144 abroad

Grants (cash & kind) 69 2,254 900 1,908 5,131 73 4 6 571 654

Commodity loans 6,093 6,155 8,093 6,408 26,749 845 201 1,294 4,312 6,652

Cash loans 2,413 2,075 2,424 2,449 9,361 4,153 350 700 697 5,900

Others 1,245 3,000 -- -- 4,245 16,627 140 16,155 12,655 45,577

Domestic Sources 2,336 2,345 3,580 3,210 11,471 2,528 1,464 5,726 6,256 15,974

50% of net profits of public 1,856 1,945 3,000 2,610 9.411 2,099 883 3,903 4,500 11,385 entities

Contributions from salaries of 480 400 580 600 2,060 394 571 689 720 2,374 public servants

Transfers from government/2 -- 34 10 1.134 1,036 2,215

TOTAL 12,199 15,888 14,997 13,975 57,059 24,343 2,185 23,882 24,491 74,901

Memorandum Item

Planned & actual investment 14,494 22,425 26,243 45,975 109,137 9,572 12,277 21,880 33,043 76,772 from Dev't Budget

/1 Only for the period January-September 1977. /2 Unidentified, likely to be surplus proceeds of the Stabilization Fund.

Source: Ministry of Planning. -108-

Table 5.8: PLANNED AND ACTUAL INVESTMENTS DURING THE THREE-YEAR PLAN (1971/72- 1973/74) AND THE FIRST FOUR YEARS OF THE FIVE-YEAR PLAN (1974/75-1978)1/ (YD Millions)

Year Initial Revised Actual

1971/72 13.5 11.1 4.0

1972/73 15.8 11.5 9.0

1973/74 11.0 9.8 12.1

1974/75 18.2 29.8 20.7

1975 (April-December) 18.0 2/ 35.1 19.1

1976 17,2 2/ 46.1 39.2

1977 14.0 2/ 79.7 57.0

1/ Initial allocations for the Three-Year Plan are in 1970/71 prices and for the Five-Year Plan are in 1972/73 prices; revised allocationsand actual spendings are in current prices.

2/ Originally, for the fiscal years 1975/76, 1976/77 and 1977/78.

Source: Ministry of Planning Table 6.1: MONETARYSURVEY, 1973-1977

(YD Millions)

1973 1974 1975 1976 1977 EnI of Period Dec. Dec. Dec. March June Sept. Dec. March June Sept. Dec.

Forei n as ;ets (net) 2 13.33 4.91 10.33 22.64 29.3J 2.14 15.18 20.18 13.44, 14.59 Benk of Ycrnen (central bank) 26.2 17.82 8.44 13.47 2.79 25.19 i 17.30 18.10 6 lE;oo flat}nrialBunk of Yemen (commercial bank) -0.81 -4.51 -3.54 -3.15 -0.16 4.17 -12.56 -2.13 2.07 -2.62 -3.42 Goverr.-ent 0.03 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Claims on Government (net) 17.19 24.01 36.71 45.87 41.28 145.27 62.13 5.4L6 67.43 72.70 72.50 clmimo 20.87 28.37 2.04 52.10 48.oo 53.11 71.19 75 21 77.38 82.62 85.06 Deposits -3.65 -4.34 -5.32 -6.22 -6.71 -7.83 -9-05 -17.74 -9.94 -9.91 -12.55 Counterpart of governnent foreign exchange -0.03 -0.02 -0.01 -0.01 -0.01 -0.01 -0.01 -0.(1 -0.01 -0.01 -Q.01

Claims on nor.governrnent sector 126 1'.93 23.61 22.07 27.44 25.89 31.15 31.148 35.95 44.48 49-.20

Other items (net) -3.90 -1-57 1.60 0.89 -7.11 -5-77 2g29 -0.09 -4.50 3,00 45 0

Domestic liquidity 49.01 54.70 66.83 79.16 84.25 94.76 97-71 104.03 119.06 133.62 140.44 Money supply 4.1TD 45.66 55.36 70.30 80.07 81.51 88.()3 99.09 109.68 115.24 Currency (32.37) (35.80) (41.33) (49.44) (53.13) (60.23) (63.82) (70.19) (75.40) (84.95) (88.2' Demrand deposits (7.73) (9.86) (14-03) (15-55) (17. 7) (19.84) (17.69) (17.84) (23.69) (24.73) (27.0dc ituasi-money 8.91 9.04 11.47 14.17 13.95 14.69 16.20 16.00 19.97 23.94 i.20

Source: Bank of Yemen. Table 6.2: FACTORS AFFECTING CHANGES IN DOMESTIC LIQUIDITY, 1973-77

(YD Millions)

Changes during 1973 1974 1975 1976 1977

Net foreign assets -1.37 -12.13 -8.42 -2.77 12.45

Net domestic assets 6.63 17.82 20.55 33.65 30.28 Net claims on Government 4.73 6.82 12.70 25.42 10.37 Claims on nongovernment 1.04 8.67 4.68 7.54 18.05 sector Other items (net) 0.86 2.33 3.17 0.69 1.86

Domestic liquidity 5.26 5.69 12.13 30.88 42.73 Money supply 5.23 5.56 9.70 26.15 33.73 Quasi-money 0.04 0.13 2.43 4.73 9.00

(In percent)

Net claims on government 37.96 39.67 52.89 69.25 16.69 Claims on nongovernment 11.28 84.50 24.72 31.94 57.95 sector Money supply 15.00 13.86 21.14 47.24 41.38 Domestic liquidity 12.02 11.61 22.18 46.21 43.73

Source: Bank of Yemen. Table 6.3: RATIO OF CURRENCY AND DEPOSITS TO TOTAL LIQUIDITY, 1972-1977

(In Percent)

End of Currency Demand Time and Savings Total December Deposits Deposits Deposits

1972 65.9 13.8 20.3 34.1

1973 66.0 15.8 18.2 34.0

1974 65.4 18.0 16.5 34.5

1975 61.9 21.0 17.2 38.2

1976 65.3 18.1 16.6 34.7

1977 62.8 19.2 17.9 37.1

Source: Bank of Yemen. -112-

Table 6.4: BALANCE SHEET OF BANK OF YEMEN, 1973-1977

(YD Millions)

End of December 31973 1974 1975 1976 1977

Liabilities Currency in circulation 32.95 36.94 42.79 65.79 92.81 Notes (32.57) (36.54) (42.34) (65.27) (92.19) Coins (0.38) (0.40) (0.45) (0.52) (0.62) Balances due to banks 6.38 2.98 1.25 9.61 4.23 Foreign liabilities -- 3.88 10.01 13.64 16.71 Allocation of SDRs 4.11 4.11 4.11 4.27 4.16 Capital 0.50 0.50 0.50 0.50 0.50 Reserves -- 0.25 0.39 0.54 0.73 Other liabilities 1.58 2.74 1.15 4.24 3.24

Liabilities = Assets 45.52 51.40 60.20 98.59 122.38

Assets External assets 26.24 21.70 18.45 28.33 34.71 Gold (0.25) (0.25) (0.25) (0.25) (0.42) Foreign exchange (21.18) (19.92) (16.86) (26.86) (32.79) IMF gold tranche (1-56) (--) (-) (--) (--) Holdings of SDRs (3.25) (1.53) (1.34) (1.22) (1.50) Claims on National Bank ------Claims on Government (net), 18.63 28.17 40.01 69.17 85.06 of which: Government securities (0.87) (0.87) (0.87) (0.87) (0.87) Treasury bills (--) (0.45) (26.00) (42.00) (55.00) Other credit (17.76) (26.85) (13.14) (26.30) (29.19) Other assets o.65 1.53 1.74 1.09 ?.61

Source: Bank of Yemen. -113-

Table 6.5: CONSOLIDATEDBALANCE SHEET OF NATIONAL BANK OF YEMEN, 1973-1977

(YD Millions)

End of December 1973 1974 1975 ;37f 977

Liabilities Total deposits, of which: 20.29 23.24 30.82 42.94 64.75 Government deposits: Demand (2.34) (2.54) (3.70) (6.95) (8.92) Time (1.31) (1.80) (1.62) (2.10) (3.63) Other deposits: Demand (7.73) (9.86) (14.03) (17.69) (27.00) Time and savings (7.46) (7.95) (9.91) (13.47) (19.27) Deposits against letters of credit (1.45) (1.09) (1.56) (2.73) (5.93) Credit from Bank of Yemen ------Balances due to foreign banks o.69 1.44 0.59 4.o6 1.90 Bills payable in foreign currencies 2.48 3.77 7.13 13.66 14.93 Deposits in foreign currencies 0.52 1.25 4.98 5.12 10.27 Capital accounts 3.65 4.59 4.59 5.05 6.17 Other liabilities 2.22 2.74 2.93 2.93 3.37

Liabilities = Assets 29.85 37.03 51.0 73.76 101.39

Assets Cash 0.58 1.14 1.46 1.97 4.57 Balances with Bank of Yemen 6.3T 2.99 1.22 9.74 4.25 Balances with foreign banks 2.28 1.12 7.94 9;85 21.48 Bills receivable in foreign currencies 0.59 0.77 1.14 0.34 2.10 Foreign investments 0.01 O.o6 0.o8 0.09 0.10 Treasury bills .2.00 -- 2.00 2.00 -- Credit to Government 0.19 0.20 0.03 0.02 -- Loans and advances 8.33 16.10 22.06 26.50 .47.07 Bills receivable in local currency 1.93 2.83 1.55 4.65 2.13 Claims on the EconoaL.c ')rganization.-/ 3.36 3.36 3.33 3.33 2.84 Domestic inestments 0.05 --O. -- -- Other assets 4.-6 8.146 10.23 15.27 16.85

1/ Claims on nationalizedbanks.

Source: Bank of Yemen. -114-

Table 6.6: DISTRIBUTION OF LOANS AND ADVANCES OF THE NATIONAL BANK OF YEMEN. 1973-1977 (YD Millions)

End of December 1973 1974 1975 1976 1977

By type of entity Public entities 3.04 10.12 16.54 20.88 37.21 CooperativesI/ 0.92 1.27 1.20 1.31 5.28 Mixed sector- 0.23 0.39 0.23 0.22 0.31 Private entities 4.14 4.32 4.09 4.09 4.27

Total 8.33 16.10 22.06 26.50 47.07

By economic sector Agriculture and fisheries o.86 1.22 1.32 1.56 2.69 Industry 0.37 0.97 1.29 2.03 4.36 Commerce and services 6.73 13.56 19.23 22.58 39.57 Other 0.37 0.35 0.22 0.33 0.45

1/ Includes enterprises jointly owned by the Government and the private sector.

Source: Bank of Yemen. -115-

Table 6.7: INTEREST RATES AS OF JANUARY 1, 1978

(In percent per annum)

Public Sector and Cooperatives Others-'

Depositsof residents Current accounts nil nil Savings deposits nil 5- S Time deposits, three months 1.0 4.5 Time deposits,six months 1.5 5.0 Time deposits,twelve months 2.0 6.o

Depositsof Yemenis abroad Savings deposits -- 5.0 Time deposits,three months -- 5.0 Time deposits,six months -- 7.0 Time deposits,twelve months -- 9.0

Loans and advances / Commercial, personal 6.o03 8.o Industrial; agricultural, fisheries 4.0 8.o Projects under Development Plans 3.0

1/ Includes the private, mixed and foreign sectors. 2/ On a maximum of YD 5,000, and applies only to individuals. 3/ Applies only to the National Company for Home Trade, the National Company for Foreign Trade and the Victory Trading Company.

Source: Bank of Yemen. -116-

Table 7.1: LAND AREA BY RAJOR USE CLASSIFICATION, 1977

Land Use Million Acres Percent of Total

Total Area 83.510 100.0

Land area used for crops/l 0.190 0.2

Additional potential cropland 0.390 0.5

Sparse grazing lands 22.400 26.8

Forested (scrub) land 6.400 7.7

Desert and wasteland 54.130 64.8

/1 Includes total area under spate irrigation, of which only about 70% is cropped in any one year.

Source: Estimates. -117-

Table 7.2: POTENTIAL EXPANSION OF CROPPING BASED ON SUITABILITY OF SOILS FOR IRRIGATION,1977

(By Wadis in Hectares)

Estimated Presently Irrigated Average Suitability Classification Total Total Average Well Total Potential Annual Governorate and Wadi I II III IV Suitable Spate Irri- Expan- Discharge Land Irri- gation sion of Wadis. gation (ha) (Million M3)

Sucratra Island 6,250 4,600 1,200 1,000 13,050 12,050 -- 20 20 12,030 --

2nd Governorate Wadi Maaden 1,365 700 -- 800 2,875 2,075 1,400 200 1,600 475 12 Wadi Al Azarik 6,000 2,450 850 -- 9,300 9,300 5,000 600 5,600 3,700 12 Wadi Al Rabwah 4,750 2,500 -- 400 7,650 7,250 1,500 250 1,750 5,500 12 Wadi Tuban 8,367 4,183 2,094 2,091 16,735 14,644 7,300 2,400 9,700 4,944 210

3rd Governorate Wadi Yaraiyis 1,025 125 100 - 1,250 1,250 900 20 920 330 10 Wadis Kabral-Azzan 31,250 22,050 2,550 550 56,400 55,850 -4,500 800 5,300 50,550 10 Wadis Torah-Toran 1,250 200 350 300 2,100 1,800 1,500 500 2,000 -- 20 Wadi Ahwar 2,220 2,250 2,040 3,730 10,240 6,510 2,200 350 2,550 3,960 39 Wadis Bana-Hesar 19,435 10,930 4,625 4,245 39,235 34,990 9,600 1,100 10,700 24,290 197

4th Governorate Wadi Dara Abadan 3,850 1,675 -- 200 5,725 5,725 1,700 700 2,400 3,125 16 Wadi Yashbam 1,050 2,175 650 200 4,075 3,875 400 500 900 2,975 7 Wadi Haifaah 525 1,175 575 800 3,075 2,275 1,200 800 2,000 275 30 Wadi Beihan-Ain 14,050 1,720 1,625 2,890 20,285 17,395 3,500 1,300 4,800 12,595 61

5th Governorate Wadi Gheil Bawzeir -- 300 625 -- 925 925 -- 350 350 575 -- Wadi Hagar 1,690 760 640 360 3,450 3,090 500 -- 500 2,590 228 Wadi Hadramawt 38,878 9,886 1,098 70,454 120,316 49,862 700 5,700 6,400 43,462 230

6th Governorate Al Wadi 550 725 350 350 1,975 1,625 - 80 80 1,545 12 Wadi Iaza -- 125 400 -- 525 525 - 320 320 205 10 Wadi Huselah 1,525 400 425 1,450 3,800 2,350 -- 80 80 2,270 125

TOTAL 144.040 68,929 20,197 89,820 322,986 233,166 41,900 16,070 57,970 175,396 1,241

Source: Departmentof Irrigation,Ministry of Agriculture and Agrarian Reform. -118-

Table 7.3: ANNUAL VARIATION IN SPATE IRRIGATION BY MAJOR WADIS, 1977

Wadi Range in Area Irrigated Estimated Average ha ha

2nd Governorate Maaden 1,000 - 2,800 1,400 Al Azorik 4,000 - 6,000 5,000 Al Rabwah 1,000 - 2,000 1,500 Tuban 6,500 - 8,500 7,300

3rd Governorate Yaraigis 700 - 1,200 900 Kabral-Azzan 3,000 - 6,000 4,500 Torah-Toran 1,300 - 1,700 1,500 Abwar 1,500 - 3,000 2,200 Bana-Hesar 7,000 - 16,000 9,600

4th Governorate Dara Abadar 1,000 - 2,500 1,700 Yashbum 200 - 800 400 Haifaah 400 - 2,000 1,200 Beihan-Ain 1,500 - 6,000 3,500

5th Governorate Hagar 400 - 700 500 Hadramaut 400 - 800 700

Total 29,900 - 60,000 41,900

Note- Based-on-Table-7.-2-

Source: Department of Irrigation, Ministry of Agriculture and Agrarian Reform. r119-

Table 7.4: ESTIMATED PERMANENT LABOR FORCE IN AGRICULTUREBY TYPE OF FARM, 1977

Total Area Average Labor Population Type of Farm Cropped Area Force Engaged ------acres------

State Farms 1/ 29,400 18,000 4,000 20,000

AgriculturalProduction 214,000 Cooperatives 100,000 36,300 189,000

Private Farms 23,000 4,000 2,500 7,500

AgriculturalService Cooperatives n.a. n.a. 16,000 80,000

Nomads n.a. n.a. 36,000 180,000

Fisheries Cooperatives n.a. n.a. 7,500 37,500

Poultry Complex n.a. n.a. 800 4,000

Machine Renting Stations n.a. n.a. 1,100 5,500

TOTAL 266,400 122,000 104,200 523,500

Note: Estimated total 1977 population= 1.73 million

1/ Includes State Livestock Farms

Source: Estimates. Table 7.5: TOTAL AND CULTIVABLE AREAS OF STATE FARMS BY GOVERNORATES FOR 1973/1974 - 1976/1977 (Area in Acres)

1973/1974 1974/1975 1975/1976 1976/1977 Culti- Culti- Culti- Culti- No. of Total vable No. of Total vable No. of Total vable No. of Total vable Governorate farms area area farms area area farms area area farms area area

First - - - 1 917 868 1 917 868 1 917 868

Second 5 2653 2297 7 3738 3446 6 2988 2719 9 4488 4012

Third 7 7170 4000 8 8730 5925 10 20213 6995 12 12813 7333

Fourth 4 5000 990 5 6000 2010 5 6000 2260 5 6000 2310

Fifth 2 2000 320 5 4050 1963 7 4500 2601 8 5175 3507

Total 18 16823 7612 26 23435 14212 29 24618 15443 35 29398 18030

Source: Central Statistical Organization. Table 7.6: ESTIMATED NUMBERAND MEMBERSHIP OF COOPERATIVES, 1967-1976

1967 1970 1973 1974 1975 1976 Type of Cooperative No. Members No. Members No. Members No. Members No. Members No. Members

Agricultural Production - - 13 19,010 41 28,960 37 27,823 45 35,419 44 35,784

Agricultural Services 7 1,970 31 15,789 31 15,737 31 15,737 31 15,737 31 15,737

Fish Production 4 73 8 539 13 4,894 13 3,421 13 3,874 13 3,874

Handicraft - - 1 23 8 1,084 8, 1,384 9 1,389 9 1,400

Consumer - - - - 22 8,775 22 8,775 23 9,675 23 9,883

Other 46 4,162 48 5,049 ------

Total 57 6,205 101 40,410 115 59.450 111 57,140 121 66,094 120 66,678

Source: Department of Plannigg and Statistics, Ministry of Agriculture and Agrarian Reform. -122-

Table 7.7: PRODUCTION COOPERATIVE FARMS, 1974-1977

Year Cultivable Area (acres)

1974 37 170,404

1975 45 207,778

1976 44 212,089

1977 44 214,233

Source: Central Statistical Organization. Table 7.8: AREA AND PRODUCTION OF MAJOR CROPS, 1974-1977

(Areas in Acres. Production in Tons)

1974 1975 1976 1977 Crop Area Quant. Yield Area Quant. Yield Area Quant. Yield Area Quant. Yield eotton 33550 10327 0.308 28022 10804 0.386 26701 9340 0.350 13059 4857 0.372

Sesame 5769 1200 0.208 7752 2000 0.258 11142 1649 0.148 20041 2926 0.146

Coffee 1500 810 0.540 1500 810 0.540 1500 810 0.540 1500 810 0.540

Tobacco 1813 1200 0.662 2182 1200 0.550 1648 1200 0.728 1278 1200 0.939

Wheat 13910 9000 0.647 18553 10000 0.539 15198 10000 0.658 17460 9114 0.522

Cereals 97925 47200 0.482 63452 25000 0.394 103942 30559 0.294 127639 41355 0.324

Tomato for Industry - - - 1402 4208 3.001 1795 4866 2.711 2495 7485 3.000

Vegetables 3920 12335 3.147 6585 19603 2.977 8648 30345 3.509 8280 28632 3.458

W.Melon & S.Melon 1557 5250 3.372 1364 5718 4.192 2046 9013 4.406 2681 9798 3.655

Fruit 2668 9617 3.604 2951 13604 4.610 2890 16738 5.791 2574 12934 5.025

Dates 8953 20000 2.234 8953 20000 2.234 6977 15000 2.150 5974 15000 2.511

Al - hinna 170 100 0.587 170 100 0.587 170 100 0.587 170 100 0.587

Qat ... 935 ...... 1063 ...... 1323 ...... 1321 ...

Fodder 18499 137000 7.406 19410 162500 8.372 23292 182000 7.814 23863 157952 6.619

Total 190234 162296 205949 227014

Source: Central Statistical Organization -124-

Table 7.9: LOCALLY PRODUCED VEGETABLES AND FRUITS HANDLED BY PUBLIC CORPORATION FOR MARKETING OF FRUITS AND VEGETABLES, 1974-76

1974~ 1975 Quamt1ty1 9{alue (Ouantity 194Value Quantit 195Value Q____t_t__9_lue (tons) (YD1,000) (tnIS (YDl1,000) (tons) (YD1,000)

Vegetables Tomatoes 2,611 91.0 4,424 162.8 4,849 183.8 Red Onions 1,457 59.2 1,324 53.0 1,352 52.6 Potatoes 146 30.7 1,677 134.0 4,203 303.3 Carrots 537 16.1 1,056 31.7 1,794 53.8 Cauliflower 47 1.4 20 0.6 33 1.0 Green Peppers 250 10.0 379 14.9 371 14.1 Eggplant 720 15.6 1,039 20.8 1,234 24.5 Okra 715 21.5 768 23.0 898 31.7 Radish 634 9.0 949 14.2 1,076 16.0 Green Onions 178 5.5 236 7.1 241 7.2 Chillis 68 7.8 79 9.5 131 16.8 Cucumber 172 5.6 162 6.0 106 3.3 Garlic 85 15.2 242 43.6 13 1.9

Other Vegetables 1,191 26.4 1,647 40.0 2,476 77.5

Total Vegetables 8,811 315.0 14,002 561.2 18,777 787.5

Melons Water Melon 3,335 46.7 3,396 47.5 5,779 81.5 Cantaloupe 703 21.1 1,002 30.1 1,153 33.7

Total Melons 4,038 67.8 4,398 77.6 6,932 115.2

Fruits Bananas 5,684 113.5 9,032 180.6 9,907 198.2 Papayas 637 16.6 545 10.9 417 8.4 Lemons and Limes 233 14.4 332 20.2 452 34.6 Dates 139 3.4 193 4.7 201 5.4 Grapefruit 6 0.6 6 0.6 9 0.9 Oranges 41 4.1 82 8.2 114 11.4

Other Fruits 657 29.6 274 27.2 350 29.3

Total Fruits 7,397 182.2 10,464 252.4 11,450 288.2

Grand Total 20,246 565.0 28,864 891.2 37,159 1,190.9

Source: Planning and Statistics Department, Cooperative Union for marketing of Fruits and Vegetables Table 7.10: DEVELOPMENT INVESTMENT IN AGRICULTURAL SECTOR, 1971/72-1977

(YD Thousands)

1971/72 1972/73 1973/74 1974/75 1975/1 1976 1977 TOTAL

Planned investment 2,831.2 2,550.2 1,433.5 7,520.4 6,375.4 7,726.0 12,986.0 41,422.7

Actual investment 1,347.9 2,376.5 2,158.3 4,958.6 4,276.3 7,869.0 12,014.6 35,001.2

Percent of planned 48.6 93.2 150.5 66.0 67.1 101.8 93.0 84.0

No. of projects ------32 31 38 N.A. --

/1 April - December, 1975

Source: Department of Planning and Statistics, Ministry of Agriculture and Agrarian Reform. -126-

Table 7.11 NUMBER OF WELLS DRILLED BY GOVERNORATE (1971f72 - 1976/77)

Governorate 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 Total

1st - - - - 18 7 25

2nd 38 22 20 21 14 11 126

3rd 27 37 28 19 16 34 161

4th 8 3 22 19 24 15 91

5th 19 28 33 13 16 35 144

6th - 5 5

Total 92 90 103 72 88 107 552

Source: Department of Irrigation, Ministry of Agriculture and Agrarian Reform. -127

Table 7.12: FIXED PRICES OF SELECTED FRUITS AND VEGETABLES, 1976 & 1977

Crops Farmgate Consumer Marketing Prices Prices Margin 1976 1977 1976 1977 1976 1977 - - - - Fils Per Kg - - - - Fils Per Kg Vegetable Crops Winter Tomatoes 25 35 45 45 20 10 Summer Tomatoes 60 60 85 85 25 25 Oct/Nov Tomatoes 70 70 85 85 15 15 Red Onions 40 50 65 65 25 15 Eggplant 20 20 35 35 15 15 Winter Okra 30 45 50 50 20 5 Summer Okra 30 35 50 50 20 15 Dry Red Pepper 200 300 300 650 100 350 Cabbage 25 25 40 40 15 15 Carrots 30 30 50 50 20 20 Cauliflower 30 30 55 55 25 25 Leeks 50 100 80 155 50 75 Green Squash 20 20 40 40 20 20 Cucumbers 50 50 80 80 30 30 Garlic 145 180 300 300 155 120 Potatoes 80 80 135 135 55 55 Cantaloupes 30 35 50 50 20 15 Watermelons 15 15 25 25 10 10

Fruits Bananas 20 30 40 40 20 20 Papaya 20 20 40 40 20 20 Guava 25 25 -40 40 15 15 Oranges 100 100 150 150 50 50 Limes 100 100 160 160 60 60 Peaches (Local) 75 75 115 115 40 40 Peaches (Indian) 100 100 160 160 60 60 Apricots 80 80 150 150 70 70 Coconuts 20 20 40 40 20 20 Dates (Fresh,Ripe) 60 60 100 110 40 50

Note: Prices which were first fixed in 1973 were not changed until February, 1977.

Source: Department of Planning and Statistics,Ministry of Agriculture and Agrarian reform. -128-

Table 7.13: FARMGATE PRICES OF MAJOR CROPS, 1978

Crop Farmgate Price Equivalent Difference Int'l 1978 Pricel/ - - - - YD Per Ton - - - -

Cotton, lint 165 530 -365

Sorghum grain 75 36 + 39

Maize grain 112 40 + 72

Sesame 112 90 + 22

Wheat 90 48 + 42

1/ Based on World Bank Document No. 814/77, Price Prospects for Major Primary Commodities.

Source: Ministry of Agriculture for domestic farmgate prices, World Bank for estimates of average internationalprices. -129-

Table 7.14: CROP YIELDS 1976/1977

Crop State Farms Total Country

- - - tons per acre - - -

Wheat 0.728 0.522

Sesame 0.156 0.146

Maize 0.454 0.377

Grain Sorghum 0.316 ( ( 0.324 Millet 0.396 (

Potatoes 3.529 (

Other Vegetables 2.710 ( 3.458

Onions 1.563 C

Fodder 10.683 6.619

Source: Central StatisticalOrganization Table 7.15: AVERAGE COST AND RETURNS PER ACRE OF MAJOR CROPS, 1976

Labor Returns Produc- Price Grain Straw Total Cost of Gross Labor cost at net of tion Kg. YD/Kg. value .,value value inputs return mandays wage input YD YD YD YD net of rate and input (0.75/ labor cost day) cost YD YD YD

Grain sorgham - spate irrigated 350 0.075 26.250 10.750 37.000 14.050 22.950 22 16.500 6.450

Grain sorgham - well irrigated 770 0.075 57.750 20.000 77.750 24.050 53.700 54 40.500 13.200

Wheat - well irrigated 1030 0.090 92.700 5.000 97.700 46.645 51.055 55 41.250 9.805 H Millet - well irrigated 870 0.075 65.250 15.000 80.250 28.900 51.350 64 48.000 3.350 1

Maize - well irrigated 1000 0.075 75.000 5.000 80.000 26.350 53.650 32 24.000 29.650

Barley - well irrigated 1450 0.075 108.750 5.000 113.750 32.080 81.670 74 55.500 26.170

Sesame - well irrigated 470 0.150 70.500 -- 70.500 20.030 44.970 50 37.500 7.470

Cotton - medium staple - spate 570 0.140 79.800 -- 79.800 25.550 54.250 46 34.500 19.750 irrigated

Tomatoes 4200 0.035 147.000 -- 147.000 47.280 99.720 80 60.000 39.720

Watermelon 4000 0.015 60.000 -- 60.000 26.225 33.775 20 15.000 18.775

Onions 4050 0.050 202.500 -- 202.500 63.500 139.000 138 103.500 35.500

Source: Based on cost and returns data given in UNDP/FAO Improvement and Crop PrQduction Project, Progress Report of December, 1977. Price and wage rates adjusted slightly and straw values added for millet, barley and maize. Table 7.16: ESTIMATED LABOR RETURN TO COOPERATIVE WORKERS FROM MAJOR CROPS, 1976 (YD) Labor return without Gross Less subsidized inputs value 15% 25% Net Labor Return Full Net Return without taxes for return man days per cost of return per straw inputs man day inputs man day

Grain sorghum - spate irrigated 26.250 2.625 6.562 17.063 22 0.775 14.050 9.575 0.435

Grain sorgham - well irrigated 57.450 5.745 14.362 37.342 54 0.671 24.050 27.655 0.512

Wheat - well irrigated 92.700 9.270 23.175 60.255 55 1.095 46.645 36.785 0.670

Millet - well irrigated 62.250 6.225 15.560 40.465 64 0.632 28.900 27.125 0.424

Maize - well irrigated 75.000 7.500 18.750 48.750 32 1.523 26.350 41.150 1.286

Barley - well irrigated 108.750 10.875 27.190 70.685 74 0.855 32.080 65.795 0.889

Sesame - well irrigated 70.500 7.050 17.625 45.825 50 0.916 25.538 37.920 0.758

Cotton - medium staple - spate 79.800 7.980 19.950 51.870 46 1.128 25.550 46.270 1.006 irrigated

Tomatoes 147.000 14.700 36.750 95.550 80 1.194 57.280 85.020 1.063

Watermelons 60.000 6.000 15.000 37.000 20 1.950 26.225 27.775 1.389

Onions 202.500 202250 50.625 131.625 138 0.954 13.500 118.750 0.860

Source: Based on Production Cost data from UNDP/FAO Improvement of Crop Production Project. -132-

Table 7.17: ESTIMATED LIVESTOCK POPULATION, 1975-1977

Year Cattle Sheep Goats Camels Donkey - - - - - 1,000 head - - - 1975 80 800 1,200 120 140

1976 90 750 1,250 100 130

1977 100 800 1,250 100 160

Source: Animal Wealth Department, Ministry of Agriculture and Agrarian Reform. Table 7.1e: TOTAL EGG PRODUCTION, 1970-1977

Year State Poultry Corporation Private and Rural Sectors Total Quantity Value Quantity Value Quantity Value (Millions) (YD1,000) (Millions) (YD1,000) (Millions) (YD1,000)

1970 0.8 14.9 9.5 108.7 10.3 123.6

1971 1.8 37.3 8.8 95.1 10.6 132.4

1972 1.1 23.1 9.7 124.9 10.8 148.0 V

1973 1.4 28.2 9.7 138.3 11.1 166.5

1974 2.0 42.0 9.0 134.0 11.0 176.0

1975 7.6 157.5 7.0 105.3 15.6 262.8

1976 18.9 392.2 4.0 65.7 -22.9 457.9

1977 7.2 148.9

Source: Department of Planning and Statistics, Ministry of Agriculture and Agrarian Reform. Table 7.19: EGG AND POULTRY MEAT PRODUCTION BY THE STATE POULTRY CORPORATION, 1970-77

Year Egg Value of Poultry Meat Value of Total VAlue Production Egg Prod. Production Meat Prod. of Production (Millions) (YD1,000) (1,000 Kg) (YD1,000) (YD1,000)

1970 0.8 14.9 .4.8 1.9 16.8

1971 1.8 37.3 8.2 3.3 40.6.

1972 1.1 23.1 7.0 2.4 25.5

1973 1.4 28.2 8.3 3.3 31.5

1974 2.0 42.0 22.8 9.1 51.1

1975 . 7.6 157.5 75.7 30.3 187.8 w

1976 18.9 392.3 218.9 87.6 479.9

1977 7.2 148.9 119.2 47.7 196.6

Source: Poultry Development General Corporation _135-

Table 8.1: FISH PRODUCTION BY COOPERATIVES AND COMPANIES, 1972-1976

(In Thousands of Tons)

Year Total Production by Cooperatives Production by Companies Quantity % of Total Quantity % of Total

1972 125.0 107.1 85.7 17.9 14.3

1973 135.4 123.3 91.1 i2.1 8.9

1974 144.4 127.4 88.2 17.0 11.8

1975 143.9 131.0 91.0 12.9 9.0

1976 153.2 135.5 88.4 17.7 11.6

Source: Ministry of Fish Wealth -136-

Table 8.2: TOTAL FISH PRODUCTION AND EXPORTS, 1965-1977

Year Production Exports Quantity Value (1,000 tons) (1,000 tons) (YD 1,000)

1965 90.0 6.2 448.5

1966 85.9 6.2 468.1

1967 81.6 5.0 366.7

1968 90.2 5.1 383.8

1969 107.3 11.4 543.1

1970 117.5 18.1 968.6

1971 118.9 20.9 1,344.2

1972 125.0 18.4 2,090.2

1973 135.4 14.6 2,178.9

1974 144.4 17.6 2,329.3

1975 143.9 18.5 2,775.0

1976 153.2 23.0 4,310.5

1977 N.A. 28.5 6,108.9

Note: In fresh weights.

Source: Ministry of Fish Wealth and Central StatisticalOrganization. Table 8.3: FISH PRODUCTIONBY KIND, 1969 - 1977

(In Metric Tons)

Kind of Fish 1969 1970 1971 1972 1973 1974 1975 1976 1977

Cuttle Fish 2,936 4,110 4,560 6,980 4,520 7,110 5,800 15,250 15,530

Lobster 111 345 - 380 470 320 700 550 680

Sardine 90,104 90,336 88,860 90,090 89,780 87,070 87,150 88,190 90,760

Yellow Fin Tuna - 54 6,070 7,370 7,380 7,400 8,580 4,420 500

Anchovy - - 410 4,530 1,090 9,390 9,990 9,300 5,340

Blue Fin Tuna 324 1,647 460 590 580 1,190 1,710 2,320 2,110

King Fish 2,424 2,182 8,980 1,340 1,440 1,800 1,720 2,350 2,620

Tuaa Like 204 1,505 860 1,070 980 970 1,130 1,390 1,650

Shark 829 1,028 820 1,770 1,910 950 2,520 4,070 9,650

Indian Mackerel 484 376 1,370 1,470 11,370 11,420 11,390 10,850 8,930

Sail Fish 1,685 3,298 2,170 450 1,260 1,230 1,310 490 910

Snapper Red 333 1,765 1,150 890 860 1,430 1,550 2,130 1,340

Other Fish 6,533 10,006 6,030 6,540 11,050 12,050 7,930 15,320 21,260

Powder Fish - - - - 450 890 680 760 690

Frozen Fish - - - - 270 50 1,370 590 100

Total 107,313 117,527 113,740 123,470 133,410 143,270 143,530 157,980 162,070

Source: Ministryof Fish Wealth / Central StatisticalOrganization -138-

Table 8.4: FISH PRICES (WET FISH)

(Fils Per Kg)

Species Old Price Post Feb.'77 Prices to Coops. Retail Prices2/ Monsoon Season Non-Monsoon (June-Oct) (Nov-May)

King Fish and other large fish 1/ 70 80 100 150

Shark 25-40 50 70

Catfish - 25 25 150

Indian Mackerel 5/piece 25 50 150

Sardines for Canning 15 25 40

Sardines for Fish Meal 15 15 25

Lobster 100 125 125 1,760

1/ Tuna, rock cod, black runner, red snapper, et. al. 2/ Consumer prices remained fixed at 150 fils per kg for all edible fish. Lobsters are not marketed internallyexcept in a few tourist hotels at YD 1.76 per lb.

Source: Ministry of Fish Wealth -139-

Table 8.5: DRIED FISH, SIXTH GOVERNORATE,1978

(Fils Per Kg)

MFW to MFW To Price to Species Coops. Retailers Consumers

Assorted 135 200 250

Sardines 13

Shark Grade I 168 300 380 Grade II- 68 Grade III 33 **

Shark Fins Grade I 29 .. Grade II 25 .. Grade III 22

Source: Ministry of Fish Wealth Table 9.1: PRODUCTION OF MAJOR INDUSTRIES, 1973 - 1977

Unit 1973 1974 1975 1976 1977

Cotton linters Tons 4,266 3,597 3,979 2,900 1,800 Electric power (Aden) Million kwh 136 134 141 153 163 Water Millior. litres 17,344 16,293 17,051 16,170 17,030 Ships built or repaired Number 326 350 363 415 369 Soft drinks Million bottles 15 18 19 24 28 Vegetable oils Thousand kgs. 5,267 4,681 3,256 3,956 2,593 Vegetable cake Thousand kgs. 14,648 10,138 9,217 6,134 6,101 Salt Tons 42,815 34,270 6,876 36,502 100,681 Matches Thousand gross 191 231 192 358 323 Paints Thousand litres 229 398 461 508 680 Shirts Thousands 247 280 356 418 615 Dairy products Thousand litres 656 787 2,901 4,538 5,945 Cigarettes Millions 137 318 487 678 768 Leather products (Tannery) Number 114,012 93,771 151,359 134,085 34,676 Paper bags Tons 407 301 217 261 455 Machinery spare parts Value in dinars 67,841 88,387 89,736 95,736 331,391 Plastic household utensils Tons 19 33 58 69 109 Tiles Hundreds 5,853 2,700 4,180 11,160 9,430 Aluminum utensils Tons 127 139 250 373 398 Sewing 000 piece 247 280 356 418 615 Batteries liquid 000 battery - - - - 11.9 Fish canned Ton - - 303 Fish meal Ton - - - - 156.8 Fish oil Ton - - - - 412 Footwear (plastic) 000 pairs 202 358 590 800 978 Nails Ton 119 91 111 224 153 Spongy product Ton - 35 162 295 431 Perfumes 000 liter - - - 10.3 27.1 Tomato paste Ton - - - - 111.9 Bags 000 bag 37 27 84 130 218 Leather shoes Number - - 6,290 46,833 75,585

Source: Central Statistical Organization Table 9.2: VALUE OF INDUSTRIAL OUTPUT AT THE SURVEYED ESTABLISHMENTS BY ISIC GROUPS DURING THE YEARS 1969-1977 1/

(000 Dinars)

ISIC Group 1969 1970 1971 1972 1973 1974 1975 1976 1977

Mining & Extraction (Salt) 103 148 160 81 134 142 25 220 613

Food and Beverages 569 743 739 1,100 3,741 6,634 6,747 11,606 14,674

Textile, Clothing and leather products 2,407 1,502 1,618 1,640 2,040 1,836 2,509 4,635 5,36'7

Wood manufacturing and products 114 - 79 78 64 130 291 264 306

Paper manufacturing, paper products, publishing and printing 46 56 86 90 89 107 83 583 1,320

Chemicals (except oil) 32 35 98 294 288 488 777 948 1,347

Non-metallic mineral products (Glass and building materials) - 38 29 15 -18 18 77 112 202

Basic metal manufacture industries (machinery & equipment) 451 532 1,036 795 894 1,202 1,423 2,061 3,076

Other manufacturing (Sponge) - - - - - 65 216 396 399

Electricity 1,047 1,112 1,368 1,365 1,574 2,568 2,313 2,682 3,591

Water 906 939 970 1,031 953 895 937 889 936

Total 5,675 5,105 6,183 6,489 9,795 14,085 15,398 24,396 31,831

- -- = =

1/ Excluding data of Aden Refinery Source: Central Statistical Organization Table 9.3: TOTAL EMPLOYMENT IN INDUSTRIALSURVEYED ESTABLISHMENTSBY ISIC GROUPS DURING THE YEARS 1969-1977 1/

1969 1970 1971 1972 1973 1974 1975 1976 1977

Mining Extraction (Salt) 221 240 259 264 250 244 148 120 279

Food and Beverages 347 404 399 704 1,423 1,466 1,345 1,579 1,866 Textile, clothing, and leather products 1,024 838 824 861 1,270 1,236 1,314 2,954 3,538 Wood manufacturing and products - - 58 67 87 314 274 323 343

Paper manufacturing, paper products, publishing and printing 14 39 40 32 30 32 29 461 527

Chemicals (except oil) - - 78 161 169 190 239 279 403

Non-metallicmineral products (Glass and building materials) 56 61 46 22 20 30 64 87 114 Basic metal manufacturing industries (machinery and equipment) 364 413 541 523 653 681 698 836 912 Other manufacturing (sponge) - - - - - 20 28 31 41

Electricity 670 722 984 1,011 1,130 1,203 1.150 1,094 1,200

Water 530 583 630 696 707 801 617 670 689

Total 3,226 3,300 3,859 4,341 5,739 6,217 5,906 8,434 9,912

1/ Excluding data of Aden Refinery. Source: Central Statistical Organization -143-

Table 9.4: PRODUCTION OF THE ADEN REFINERY 1969-1977

(Million Long Tons)

1969 1970 1971 1972 1973 1974 1975 1976 1977

Gasoline 0.6 0.7 0.4 0.5 0.5 0.5 0.2 0.2 0.3

Jet fuel 0.9 0.9 0.6 0.4 0.3 0.3 0.3 0.2 0.2

Fuel oils 4.6 4.6 2.4 2.5 2.0 1.8 1.1 1.2 1.3

Other products 0.2 ------

TOTAL PRODUCTION 6.2 6.2 3.4 3.4 2.8 2.6 1.6 1.6 1.8

Source: Central Statistical Organization. -144-

Table 9.5: OPERATIONS OF THE ADEN REFINERY, 1970-1977

(Quantityin Millions of Long Tons; Value in Millions of Yemeni Dinars)

1970 1971 1972 1973 1974 1975 1976 1977

Imports of crude oil Quantity 6.4 3.7 3.3 3.1 2.7 1.6 1.7 1.8 Value 33.2 23.8 22.9 23.7 73.5 44.3 51.0 58.6

Imports of semifinished products (quantity) -- 0.1 0.3 0.2 0.2 0.1 0.1 -_

Production (quantity)/l 6.2 3.4 3.4 2.8 2.6 1.6 1.6 1.8

Exports Quantity 5.6 3.1 3.1 2.7 2.1 1.4 1.5 1.7 Value 45.5 29.2 30.1 29.0 74.9 55.4 -- --

Supply of bunker fuel oil (quantity)/2 0.5 0.3 0.4 0.4 0.3 0.3 0.6 0.7

Supply for domestic consumption (quantity)/3 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

/1 Input of crude oil adjusted for loss in the process of refining. /2 The Aden refinery does not provide all the fuel oil supplied to ships in Aden; some of the bunkering companieshave their own arrangementfor the supply of fuel oil from other sources. /3 The Aden refinery supplies about one fourth of domestic consumptionin the P.D.R. of Yemen.

Source: Aden Refinery Company. -145-

Table 9.6: LOCAL CASH OUTLAYS OF THE ADEN REFINERY, 1969-1977

(YD Millions, current prices)

1969 1970 1971 1972 1973 1974 1975 1976 1977

Payments to the government 1.4 2.1 1.7 1.6 1.5 1.4 1.7 1.6 0.3

Payments to the government 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.4 0.4 departments for services

Payments to the Yemen Ports 0.2 0.3 0.4 0.3 0.2 0.2 0.2 0.1 0.1 Corporation

Payments to contractors 0.2 0.1 0.1 0.1 0.1 0.2 0.2 0.1 -

Salaries and wages 2.0 1.7 1.6 1.5 1.5 1.5 1.5 1.4 0.8

Other payments 0.5 0.6 0.7 0.6 0.6 0.6 0.6 0.3 0.1

TOTAL 4.4 4.9 4.6 4.2 4.0 4.0 4.3 3.7 1.7

(Total in million US dollars) (10.6) (11.8) (11.1) (10.9) (11.4) (11.6) (12.4) (10.7) (4.9)

Source: Aden Refinery Company. -146-

Table 10.1: ACTIVITY IN ADEN PORT, 1973-1977

(ThousandLong Tons)

1973 1974 1975 1976 1977

Ships Number of ships calling 1,320 1,233 1,451 2,336 2,605 Net registered tonnage 5,565 5,107 6,016 9,944 10,738 Dry cargo imported 312 374 327 387 618 Dry cargo exported 65 54 31 80 79 Oil imports 3,342 2,885 1,655 1,779 ;,811 Oil exports 2,724 2,185 1,478 1,311 1,294 Bunker fuel oil 388 303 296 638 658

Dhows-/ Number of dhows calling 625 557 396 234 178 Net registered tonnage 62 55 44 25 20 Dry cargo imported 15 13 10 3 1 pry cargo exported 39 33 25 12 12

1/ Powered barges of small tonnage used mainly for coastal trade.

Source: Yemen Ports and Shipping Corporation. -147-

Table 10.2: ADEN PORT: SUPPLY OF PETROLEUM PRODUCTS BY cOmSANY, 1977

(Tons)

Type of oil Supply\product Fuel oil Gas oil Diesel TOTAL Company

British Petroleum 177,198 15,091 31,436 223,725

Aden Refinery 12,511 1,306 656 14,473

Caltex 15,620 1,585 3,275 20,480

Mobil Oil 149,234 17,453 12,131 178,818

Yemeni - Kuwait 177,483 24,250 19,508 221,241 Company

TOTAL 532.046 59,685 67,006 658.737

Source: Port of Aden Authority. -148-

Table 10.3: ADEN PORT, DIRECTLY IMPORTED AND DOMESTICALLYPRODUCED PETROLEUMPRODUCTS SUPPLIED TO BUNKERING SHIPS, 1977

(Tons)

Yemen - Mobil Caltex British Kuwaiti Oil Petroleum TOTAL Company (Tawahi)

Imported directly 162,555 146,457 20,373 - 329,385

Aden refinery 103,895 18,613 - 283,027 405,535

TOTAL 266,450 165,070 20,373 283,027 734,920

Source: Port of Aden Authority. -149-

Table 10.4: MOVEMENT OF GOODS IN ADEN FREE ZONE, 1974-1977

1974 1975 1976 1977 Quan- Quan- Quan- Quan- tity Value tity Value tity Value tity Value (Tons) (YD 000) (Tons) (YD 000) (Tons) (YD 000) (Tons) (YD 000)

Movement of Goods into Free Zone

Private Warehouse 4,973 2,286 2,579 1,256 4,877 2,064 5,745 2,787

Public Warehouse 3,301 2,790 1,841 1,920 2,530 2,774 3,920 3,318

Open Areas - - - - 144 76 429 175

Total 8,274 5,076 4,420 3,175 7,551 4,914 10,094 6,280

Movements of Goods out of Free Zone

Goods Used for Local Consumption 3,347 1,880 182 183 619 145 384 119

Goods Exported from Free Zone 4,713 2,195 3,898 2,867 5,987 4,975 8.676 6,196

of which by:

Sea (1,231) ( 703) (1,294) ( 672) (1,088) (1,821) (1,094) (3,497)

Land (3,121) ( 919) (2,019) ( 993) (3,878) (1,016) (16,925) (1,115)

Air ( 361) ( 573) ( 585) (1,202) (1,021) (2,138) ( 657) (1,584)

Total 8,060 4,075 4,080 3,050 6,606 5,120 9,060 6,315

Source: Port of Aden Authority -150-

Table 11.1: LENGTH AND DISTRIBUTIONOF ROAD NETWORK AS OF JANUARY 1, 1973-1978

(In KM)

Governorate First Second Third Fourth Fifth Sixth TOTAL

Asphalt 1973 140 88 137 -- -_ 365 1976 140 122 264 106 6 -- 365 1977 140 129 293 176 185 -- 923 1978 140 129 303 176 317 -- . 1065 Cobble 1973 ------194 -- 194 1976 ------2 253 -- 255 1977 ------2 276 -- 278 1978 ------5 276 -- 281

Gravel and earth 1973 46 606 680 1138 2414 486 5370 1976 165 572 688 1030 2349 604 5407 1977 164 565 642 1030 2147 611 5159 1978 191 573 642 1042 2038 646 5132 Beach 1973 4 25 136 79 129 -- 373 1976 4 25 136 79 129 -- 373 1977 4 25 136 79 129 -- 373 1978 4 25 136 79 129 -- 373 TOTAL 1973 190 719 953 1217 2737 486 6302 1976 308 719 1088 1217 2737 604 6673 1977 308 719 1071 1287 2737 611 6733 1978 335 727 1081 1302 2760 646 6851

Source: Ministry of Construction Table 11.2: INTERNATIONALTELECOMMUNICATIONS STATISTICS, 1972-77

InternationalTelephone Traffic InternationalTelex Traffic InternationalTelegraph Traffic

Incoming Outgoing Incoming Outgoing Incoming Outgoing

Year Calls Minutes Calls Minutes Calls Minutes Calls Minutes Messages Words Messages Words

1972 12,132 75,786 8,804 37,175 4,662 26,690 3,215 18,407 74,950 1,753,830 70,197 1,805,987

1973 11,589 54,906 8,449 38,617 8,020 40,580 5,855 29,620 76,254 1,784,344 70,374 . 1,&44,883

1974 12,455 60,482 10,454 50,268 13,680 80,580 11,403 64,462 70,680 1,653,912 64,426 1,519,381

1975 12,163 62,819 10,956 49,942 21,950 127,455 18,297 101,964 70,564 1,651,198 63,149 1,477,687

1976 35,240 161,011 23,001 97,355 32,925 191,180 26,530 147,850 68,450 1,601,730 61,255 1,433,356

1977 38,769 180,256 25,202 110,550

Source: Cable & Wireless Ltd., Aden. - 152 -

Table 11.3: TELEPHONE STATISTICS, 1972-1977

Year Automatic Manual Others No. of Subscribers

1972 7 4 - 5749

1973 7 4 - 5713

1974 7 4 - 6037

1975 7 4 - 6522

1976 7 4 - 7100

1977 7 4 - 7900

Source: Central Statistical Organization. - 153 -

Table 11.4: PCCII CONTRACTS AND IMPLEMENTEDWORK, 1977

(YD Thousands)

Value of Value of Value of Project Contract executed work work planned up to Dec. 31, for 1978 1977

First Governorate Vegetable oil factory 350 300 50 Housing project (180 535 490 44 apt's: Mansoura) Housing project (180 1,125 141 104 apt's: K/Mksar) Institutionbuilding 300 151 104 Hospital of Neurology 660 231 264 Sewerage of the 518 30 257 industrialdistrict Higher school for 670 90 186 scientificsocialism Warehouse for HTC 584 479 105 Maternal & pediatric 2,000 35 195 hospital Warehouse for FTC 65 12 53 TOTAL 1st G 6,807 1,959 1,578

Fifth Governorate Fish canning factory 400 180 127 Fish refrigeration 130 110 20 project Multi-purposeproject 1,142 200 392 Warehousesfor HTC 141 67 71 General hospital 1,000 10 252 TOTAL 5th G 2,813 567 862

GRAND TOTAL 9,621 2,526 2,440

Source: Ministry of Construction Table 12.1: ESTIMATED FOOD SlUPPLIES PER CAPITA, 1968-1977

1976~ 1 Commodity 1968 1969 1970 1971 1972 1973 1974 1975 197 1977~

- - - - Calories Per Day - - - -

Total. 2,281 9 145 2,201 r',O95 2,0^' ?,OQ/, 1 87° 1 1l 1.q'

Vegetable Prod*&ts 1 R0g 1,777 1,832 1,76/: 1,781 1,758 1,702 1,5CO. 1,517 1 ' 7 Animal Products 392 368 369 331 314 306 282 29,z 296

Cere_1 lsP 1,18? 1,'' 1,'.'c 233 1,220 ',20^ 1,i '' 102 ,

- - - Proteins-Grammes Per Day - -

Tonl ___R 52.8 5. 53,7 52.7 55 2 54.1 53.n 51.P 55 7!

Vegetable Products 40.6 36.7 37.9 37.6 39.0 38.8 37.5 35.5 337 3^.O Animal Products 15.3 16.2 14.7 16.1 13.8 16.'; 16.6 17.- 183.1 17.7

- - Fat -Grammes Per Day - - -

Total 47.9 44.8 45.5 43.8 43.6 42.0 43.9 41.0 39.7 39 *

Vegetable Products 15.3 15.0 14.5 17.1 17.3 17.9 22.2 18.0 17.5 17.3 Animal Products 32.6 29.8 31.0 26.7 26.3 24.1 21.7 22.9 22.2 22.2

, Preliminary

Sc'u:--: Food and A,-_iculture OrO-7n'4 ation of UrL'-^ Nations (figu-es validate--. to 1976) Table 12.2: CALC'JLATION OF COST OF ANNUAL FOOD &ASl= PER CAPITA, 1977

Rural Urban Commodity Quantity Price Cost Calories Quantity Price Cost Calories Kg fils/Kg YD Equivalent Kg fils/Kg YD Equivalent per day ner day

By Al-Handashah Consultants I/ Rice 34.430 110 3.787 340 24.897 110 2.739 245 Sorghun & Millet 7.880 75 591 73 2,701 80 216 25 Lemons & Limes .616 150 092 1 1.896 150 284 3 Dates 26.130 110 3.624 143 2.895 110 318 16 -Bananas 5.790 40 232 9 19.300 40 772 32 Penners 1.530 65 99 1 3.555 65 231 2 onions 7.850 65 510 8 6.120 65 398 6 Eggolants 3.740 35 131 3 3.972 35 139 3 Cauliflower .450 55 25 - 1.140 55 63 1 Tomatoes 17.940 45 807 11 34.880 45 1.570 21 Potatoes 2.700 135 365 6 8.760 135 1.183 18 Sesame 8.610 150 1.292 133 6.212 150 932 96 Wheat 74.590 90 6.713 674 105.270 100 10.527 952 Meat 3.330 400 1.332 23 7.540 700 5.278 52 Milk 20.780 50 1.039 148 56.640 50 2.832 403 "n Fish 7.010 150 1.052 19 10-830 150 1.625 30 Eggs (dozen) (1) 275 275 - (1 1/2) 275 412 - Mellons 2.000 25 50 15 4.696 25 117 35 Papayas - 40 - - 2.782 40 113 4

Sub-total 22.016 1.607 29.749 1.944

Added 12ssion Estimates Tea - 1.500 550 825 - 2.000 550 1.100 - Lentils 2.000 90 180 18 2.000 90 180 18 Coffee 21 1.000 250 250 - 2.000 250 500 - Edible29 ils- 8.000 315 2.520 188 10.000 350 3.500 235 Sligar - 14.000 250 3.500 150 18.000 250 4.500 192 Other vegetables & mellons 10.000 40 400 6 10.000 40 - 400 6

Sub-total 7.675 362 10.180 451

TOTAI. 29. 1.969 39.929 2395

-eNote: Estimated food sunolies in 1977 by FAO were equjivalent to 1,963 calories per day ner capita.

1/ We ghted Per canita food consumotion of major comnodities by Al-Handasah Engineers & Architects. Beirut 2/ Based on imnorts of 1007. of consumntion of sugar and tea and 70% of edible oil consumntion. Source: Mission calculations. - 156 -

Table 12.3: 1973 POPULATION BY SEX AND EDUCATIONAL STATUS (FOR PERSONS OVER 10 YEARS OF AGE)

Females Males Total

Urban population,of which 163,522 188,577 352,099 illiterates 130,456 72,423 202,879

Rural population,of which 311,279 256,858 568,137 illiterates 298,985 136,935 435,920

Nomads, of which 52,965 51,188 104,153 illiterates 52,606 44,819 97,425

Total, of which 527,766 496,623 1,024,389 illiterates 482,047 254,177 736,224

Source: Ministry of Education Table 12.4. STATISTICAL INDICATORS ON( FORMIAL EDIICATION, 1961;'67-1976,'77

(I.. of Teachers Er.srotl.et Avrg o. of st. A.erge no. of PritlclparfnmRate as* Fer- No. of Schools Prim. Prep. Sec-d. Pri.. Prep. Second. d-,tc pe.r £a]- -. Students per reherta of Relsvss:t Ae Cro Prim. Prep. Second. M1 F i P H1 p H F Ht F Mt F Fris. Prep. Se-od. Pri- P-cp. Second. (7-12) 13-151 (16-18)

1966/67 329 53 7 1,37B4 367 - 116 49 39,762 10,166 8,897 2,685 2,446 546 . . .. 29 .. 18

1970/71 844 59 8 4,316 6311 139 107,925 26.959 10.994 2,664 2, 34 679 35 35 28 31 22 22 51.0 1O 1. 2

1973/74 1.026 105 19 4,531 1,524 772 227 293 67 136.577 47,167 18,537 4,701, 5,509 1,424 36 39 40 29 23 18 63.6 23.4. 8.8

1974/75 963 151 19 4,885 1,582 928 300 346 83 136,855 59,611 74,077 6.397 6,324 1,s-i 37 32 40 30 25 18 66-0 29.8 q 7

1975176 962 191 21 4,915 1,743 1,238 375 374 50 135,653 67,964 26,623 7,725 7,568 2,199 38 38 43 31 21 23 66.5 92 7 II 7

1976/77 976 326 25 6,598 2,420 I/ I/ 473 59 134,827 71,531 32,626 10.782 8.620 2,326 .. . . 28 1 21 65.4 40.1 IZ-R

1977178

1975176

Distrlbotion by

First (. Is 9 689 629 312 271 148 44 26,139 20,998 7,214 4,922 3,887 1,825 46 42 45 36 21 30 .

qee- d 2 77 30 1 1,u60 199 216 3, 36 -- 25,1(76 10,884 5,0(29 725 568 79 33 41 46 29 23 i8s..

T6h(id 195 45 4 1,082 336 211 12 47 - 28,185 14,040 4,124, 712 780 88 36 38 38 30 22 is. ~ .

F.."rl, 122 I4 1 541 113 94 1 18o - 14,077 3.904 2.241 12 185 -- 33 36 37 27 24 10to

Fifth 377 781 6 1,359 420 352 55 125 6 40,026 15,972 7,557 t,349 2,148 207 39 35 41 31 22 IS

clIsth 29 4 -- 185 46 53…- - - 2,002 1,246 448 5 -- -- 28 35 -- 14 9 -- .

so.t -vilable

I/ Prls-.y .nd pcspar,,tory level -r being cobined to -se level: unity schotls comprt,tIng the first eight pears of ed-.ti-o.

S..-ree PISe5tly of Education - 158 -

Table 12.5: SUBJECTS STUDIED AT THE UNITY LEVEL AND SECONDARYLEVELS (Hours taught per week)

Unity Level - - SeccTudaryLevel 1 2 3 4 5 6 7 8 9 10 1 1ScienceLit

Arabic 9 10 10 10 8 7 6 6 6 6 5 4 7

English - - - - 5 5 4 4 5 4 4 4 6

Mathematics 6 6 6 6 6 6 6 6 5 5 5 8 5

Sciences - - - - 3 5 6 6 6 9 10 12 7

Social Sc. 3 3 5 5 - - 2 2 2 1 1 - -

History - - - - 2 2 2 2 2 2 2 1 2

Geography - - - - 2 2 2 2 2 2 2 Z- 2-

Phys. Educ. 2 2 2 2 2 2 2 2 2 1 1 - -

Voc. Training 2 2 2 2 2 2 2 2 2 2 2 2 2

Music 1 1 1 1 1 1 1 1 - - -

Religion 2 2 2 2 2 2 2 2 1 1 1 1 1

Arts 1 1 1 1 1 1 1 1 1 1 1 1 1

Philosophy ------2 2 2 2 4

TOTAL 26 27 29 29 34 35 36 36 36 36 36 37 37

1/ Astronowy is taught in the 12th grade.

Source: Ministry of Education. Table 12.6: STATISTICAL INDICATORS ON TEACHERS TRAINING AND TECHNICAL EDUCATION, 1966/67-1976/77

Teachers Training: No. of Technical Institutes: No. of Commercial Schools: No. of Agriculture Schools: No. of Schools Teachers Students Teachers Students Teachers Students Teachers Students M F

1966/67 3 45 150 90 39 223 - - - -

1970L71 4 24 264 122 30 93 15 143 10 64

1973/74 4 35 278 130 46 133 15 137 20 136

1974/75 5 75 462 169 33 214 14 198 16 167

1975/76 6 62 563 231 27 357 18 182 15 161

1976/77 6 72 214 369 49 477 17 250 .. 203

1977/78 @

not available

Source: Ministry of Education and Maalla Technical Institute. - 160 -

Table 12.7: HIGHER EDUCATION, ENROLLMENT AND FACULTY, 1970/71-1976/77

Base Year 1976/77

Opening Enrollment No. of Enrollment No. of School Year M F Teachers M F Teachers

Education 1970/71 78 32 13 650 327 116

Agriculture 1970/71 40 - 14 92 19 15

Econ. & Pub. 1973/74 24 13 8 253 83 31 Adm.

Medicine 1975/76 49 14 11 87 31 25

Engineering 1975/76 69 7 3 132 19 21

Source: Ministry of Education. Table 12.8: PDRY STUDENTS DEPARTING FOR HIGHER EDUCATION ABROAD BY SPECIALTY AND COUNTRY (1975/76 and 1976/77)

Public Country/Specialty Medicine Engineering Agriculture Science Economics Law Administration Arts Total

USSR 25 190 13 3 19 23 1 12 286

GDR 13 34 10 - 1 3 - 1 62

China, PR 12 46 - - - - - 1 59

Romania 5 17 4 - 4 2 2 7 41

Bulgaria 4 18 7 - 2 - - 1 32

Other Socialist Countries 27 112 5 10 4 9 - 13 180

Arab Countries 5 20 - 19 14 16 9 46 129 1 0' Other Countries 4 24 - 1 1 - - 3 33

TOTAL 95 461 39 33 45 53 12 84 822

Source: Ministry of Planning Table 12.9: ANNUAL NUMBER OF STUDENTS DEPARTING FOR HIGHER EDUCATION ABROAD, 1969/70-1977/78

Country 1969/70 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78

A B A B A B A B A B A B A B A B A B

USSR 40 42 63 55 28 30 34 40 48 50 89 90 127 135 193 215 207 225

GDR 12 12 14 15 13 13 13 13 8 13 5 13 20 23 41 43 27 27

Romania - - 2 2 21 22 23 30 25 25 23 23 21 22 20 21 22 22

Hungary 9 13 - - 11 20 13 22 18 28 20 30 24 30 35 44 38 44

Egypt 50 50 - - 25 25 23 25 24 28 28 41 44 60 - 10 7 8

Algeria 9 10 - - 9 10 9 9 - 5 16 16 15 15 12 12 5 5

Others 49 50 69 78 69 78 58 67 67 77 106 123 140 145 106 122 111 135

TOTAL 169 177 148 150 176 198 173 206 190 226 287 336 391 430 407 467 417 466

A. No. of students departing for study abroad on scholarship.

B. No. of new Scholarships offered.

Source: Ministry of Planning. - 163 *

Table 12.10: ILLITERACYPROGRAMS, 1970/71-1976/77

Number of Academic Classes Enrollment Total Year M F T M F T Graduates

1970/71 45 20 65 1,392 600 1,992 270

1971/72 74 31 105 22,046 1,170 3,416 563

1972/73 207 111 318 5,799 3,277 9,076 2,049

1973/74 1,002 840 1,842 28,148 29,499 57,647 5,289

1974/75 656 1,261 1,917 16,632 39,565 56,197 10,746

1975/76 1,271 2,414 3,685 26,066 59,605 85,671 21,780

1976/77 735 1,575 2,310 20,443 41,046 61,489 14,699

TOTAL 3,990 6,252 10,242 100,726 174,762 275,488 55,396

Source: Ministryof Education. Table 12.11: EXPENDITURES ON EDUCATION, 1966/67-1977 (YD Millions)

Expenditures by Total Expenditures Ministry of Education Government Experlditures on Education as a percentage of Gov't Current Capital Total Current Capital Total Expgenditures

1966/67 .. .. 2.37 .. 23.37 10.1

1970/71 .. .. 2.23 .. .. 17.24 12.9

1973/74 3.84 0.81 4.65 22.90 12.06 34.96 13.3

1974/75 4.49 0.69 5.18 27.61 20.66 48.27 10.7

1975 4.29 1.19 5.48 25.33 19.12 44.65 12.3

1976 6.33 1,83 8.26 39.15 39.12 78.27 10.6

1977 8.26 3.11 11.37 44.49 56.95 101.44 11.2

not available.

Source: Ministries of Education, Finance and Planning. Table 12.12: MEDICAL AND AUXILIARY HEALTH STAFF BY TYPE AND GOVERNORATE, 1977

Governorate: First Second Third Fourth Fifth Sixth Total Yemeni

Physicians 162 13 10 2 34 1 222 125

Dentists 5 1 - - 1 1 8 5

Pharmacists 16 1 - - 2 - 19 11

Medical Assistants 8 49 98 42 128 7 332 332

Qualified Nurses 109 5 8 - 9 - 131 120

Lab Technicians 19 - - - 5 24 22

X-Ray Technicians 7 - - 1 9 - 17 16

Qualified Midwives 7 - _ _ _ _ 7 7

Health Inspectors 7 - - - 3 - 10 10 u'

Community Midwives 144 9 37 5 7 3 205 205

Practical Nurses 499 150 186 82 197 28 1142 1142

Auxiliary Health Staff 148 20 20 13 33 3 237 237

Others 70 2 3 2 29 2 108 108

TOTAL 1201 250 362 147 457 45 2462 2340

Source: Ministry of Health - 166 -

Table 12.13: HEALTH FACILITIES BY GOVERNORATE, 1970, 1973 AND 1977

Health Units Health Centers Hospitals No. of Hospital Beds Governorate 1970 1973 1977 1970 1973 1977 1970 1973 1977 1970 1973 1977

First 8 10 14 - - 1 3 5 6 751 899 919

Second 22 40 51 - 1 1 2 3 5 95 178 301

Third 21 49 60 - 3 3 2 3 5 130 240 321

Fourth 13 35 51 - - 1 3 3 3 120 120 135

Fifth 31 74 79 - 2 8 6 4 6 182 361 455

Sixth 4 5 8 - - 3 - 1 1 - 20 88

TOTAL 99 213 263 - 6 17 16 19 20 1,278 1,818 2,219

Source: Ministry of Health - 167 -

Table 12.14: EXPENDITURESON HEALTH, 1971/72 and 1977

1971/72 1977

Expenditures on health (YD million) 1.02 3.22

Current (1.01) (2.45)

Capital (0.01) (0.77)

Current Expenditureson health as a percent of Government Current Expenditures 5.0 5.5

Capital Expenditures on health as a percent of Government Capital Expenditures 0.2 1.4

Total Expenditures on health as a percent of Government Total Expenditures 4.2 3.2

Total Expenditures on health as a percent of GNP 1.0 1.7

Source: Tables 5.4 and 5.5 and previous Bank reports. - 168 -

Table 12.15: HOUSING SECTOR: PLANNEDAND ACTUAL CONSTRUCTION,1973/74-1977

Planned Under- Units Built Construction Not Yet Begun

1st Governorate Flats 2,196 606 152 1,438 Low cost housing (huts) 560 208 328 24 Houses for expatriates (prefabricated) 110 - 25 85

Total for 1st Governorate 2,866 814 505 1.547

2nd Governorate Flats 180 76 70 34 Low cost housing 76 32 44 --

Total for 2nd Governorate 256 108 114 34

3rd Governorate Flats 90 72 18 - Low cost housing 156 144 12

Total for 3rd Governorate 246 216 30

4th Governorate Flats 24 - 24 - Low cost housing 63 16 28 19

Total for 4th Governorate 87 16 52 19

5th Governorate Flats 32 ^2 - -

Total for 5th Governorate 32 32 _ _

6th Governorate Low cost housing 42 27 - 15

Total for 6th Governorate 42 27 - 15 1/ Thamud District Low cost housing 48 45 3 - Total for ThamudDistrict 48 45 3 -

SocotraIsland Low cost housing 12 12 -

Total for Socotra Island 12 12 - -

Total for PDR Yemen 3,589 1,270 704 1,615 Flats 2,522 786 264 1,472 Low cost housing 957 484 415 58 Housing for Expatriates 110 - 25 85

1/ Now incorporatedin 5th Governorate 2/ Administrativelypart of the 1st Governorate

Source: Ministryof Planning Table 13.1: ADEN COST OF LIVING AND WHOLESALE PRICE INDICES, 1970-1977

(1969 = 100)

Relative Weights 1970 1971 1972 1973 1974 1975 1976 1977

COST OF LIVING INDEX

General Index 100.0 105.0 110.6 116.4 134.6 167.3 187.1 194.0 203.9

Foodstuffs 50.8 106.5 114.4 119.0 147.7 181.7 196.0 201.2 203.3 Fuel, water and lighting 3.5 100.2 102.3 107.9 111.2 155.6 201.7 206.9 215.8 Rent 6.0 100.0 100.0 89.6 75.1 75.0 75.0 75.0 75.0 Clothing 9.0 108.7 109.8 135.1 143.3 236.2 309.0 349.3 389.5 Household supplies 3.6 103.8 110.6 118.0 134.2 151.4 176.7 184.2 207.8 Qat, tobacco & alcoholic beverages 10.0 105.6 115.5 124.9 146.2 174.5 200.7 201.1 208.7

Other 17.1 101.2 101.8 105.0 110.5 121.9 126.6 125.4 147.5

WHOLESALEPRICE INDEX

General Index 100.0 106.0 117.0 120.0 162.8 229.0 271.1 287.2 305.5

Foodstuffs 48.5 111.9 127.0 132.2 181.6 248.7 271.1 279.3 285.8 Raw materials 13.1 94.0 92.0 94.7 113.4 116.6 113.6 166.1 254.7 Industrial products 23.2 101.3 110.5 113.2 171.7 244.1 352.1 384.1 394.0 Building materials 5.5 112.4 124.8 112.0 128.3 221.9 317.9 279.1 299.2 Fuel 9.7 100.5 112.1 114.1 135.5 249.8 264.7 264.4 264.7

Source: Central Statistical Organization

The World Bank

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