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World Bank Document DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized Not For Public Use Fii n Rerort No. 98a-YAR Public Disclosure Authorized ECONOMIC DEVELOPMENT IN THE YEMEN ARAB REPUBLIC Public Disclosure Authorized June 18, 1973 Public Disclosure Authorized Regional Office for Europe, Middle East and North Africa .^is report was prepared for official use only by the Bank Group. It m.ay not be pubLished, nuoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report. Currency Equivalents Free IMarket RateU / 1972 Average March 1973 1 Yemeni rial $0.20 $0.22 1 US Dollar 5.0 rials 4.50 rials -/ No par value has been communicated to the IMF. lLowever, thLe Yelmen Arcab)Rpbi g-e n17 to a provisional rate of US$1 = YR5. Most free ar-ket transactions took place at that rate during 1972. Following the devaluation of the dollar in February 1973, the rial appreciated to a rate of $1.00 = YR4.50. TABLE OF CONTELITS Page No. MAP BASIC DATA I TNTRfWDUCTONo. 1 TT mrITOUCTTRAL C-ARACT3RRSTT.S. 1 Resources and the Origin of Production.. 2 PFpla_tion and Social Se-tnira . .. Macroeconomic Features..... 6 Connfrainta to Develment . *. 8 TTT _R_RMT RECYOJMTr_ nlR_VTfOPM_iJWTS . 10 Developments in the Ptvblic Finances . ... 12 Balance of Pymp-n-ts Developments . 13 Reserves and External Debt . ...... 1 Mvwoau' Pr'5vea smdi G-t31t = = . ... ,- -... 15 Sectoral Developments and Projects . 16 ANNEX I: THE CURRMT POSITION AND PROSPECTS OF YEM'S A)flfl'YTT * 31WU7TTAT.r, 5~r1WfThIlhnATIrnrIT Afl*,i f .16..L S J J'.n a .J1S LI5Vl± JIkLAJ"nj..I A7 Ir TTI: vnT1.TMnF OrTA PTsTvuwsTi ATT r%r)nOPnnTArnTP A1krThTWV TTTrl. L?ThflRAVV MCI AT'!M Mlnt4MA,UE' ^V'M IIAV'iO 1AV'NXM 2UI1±1 W L.L .L. LhVWJUWU.LL VL ^A.LJ ULVJWjUZWW1J WE rJL'J 1LJ A.J±I I MA1'PTQITr'AT ADUIrTIT7 k0J.MJ3..LUL0.L'JA0JJ J LLA A%dLA This report is based on the findings Of an economic II" . 'OADWA.LY..ji V E'.J L II .1.E'J.E' A%-LUJ "WVUWA.LJ..L%, ULL WUE'UWS UWE'.L( October 1972. The miassion was conposed of Messrs. Robert Dunmouuin (irrigation engineer)j Tae-Hee Yoon (agricultural ea0n%-1-Ui st), aLr,U V-shCLad UZu,arl %econos,idsW A~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6 tA JUNr-E eA ".. URr<a&| ... YEMEN ARAB REPUBLIC | rwB r;\ hlrrosAs Ils te> ||S A U D IA R A BI A Tihomo Cooslol PIoAns / ;8dC \ / ->. | | In~~~~~~~~~~~~~~~~~~~~rerotnPloteou 5 Q D ^25~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ tr l||,.... _Ronges .r1Cerol t ( > ;;, -i<s_><> p6rl x, F~~~~~~~~~~~~~ovedFr mory Roads I \ S !r of | _ ~~~~~~~~~~~~~~~~UAp.,ed Grovei Pri-oy Roads i~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~ ~ + -e- -r P,,oi Roaods Under Co,,st,.ctioA X (3 ~~~~~~~~~~~~~~~~~~~~~NoalwnlColotal )g1 O~~~~~~~~~~~~~~~~~~~~~~~~Other Cites, Towns o&Vi loges t \ _ _. ~~~~~~~~~~~~~~~~~~~~~~~~~~Internotonol Boundarmes < ? 9 ! \ aE * Internotionol ~~~~~~~~~~~~~~~~~~~~~~~~Airports L,6- 1 ) Ac\ f sh3mer d[OMETEhS 8 I J / . V | ' O ZO ~~ ~ ~~~~~~~~~~~~~~~~~~~4,0DO r j O );t / < / ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~MILES | X rn aa \ < ' ~~~03b ~ ~ ~ ~~~~~Al bDind;udr C9 > X Sirrdudi, di-, X i~~~~~~~~ 2' AV} Abi S °Zurojoh /l ~~~W~ j \ - ' Al dn A~~~~~~~~~~~~~~POlE' DEMOC \RAToICo hrEPUBIC OF YEME ~~~~\\ V ~~~~~~~~~~~~~03ni Shibob \ | A )) / f /A~~~~~~~~~~~~~~~~~~~~~~~~~DEN X~ ~ ~ ~ ~ ~ ~ ^ S~~~~GIF Of A DfVN /'T. A.I -da ft"vIA-jSFssStt j J 44 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~46' l&URT nATA - VVLW Afl&R rR=MTT,Tr AREA POPULAT ION DENSITY Roughly 190,000 sq. km. 5-6 million (1972 est.) about 30/sq. km. r.LLoJ w<s V.L (1960-70) POPULATION CHARACTEF¢STICS HEAITH Life expectancy: est. 30-40 years Population per physician: 20,000 est. I uant mortality: about 50% r0pUiLatIon per h ospiUUUal eda. NUTULLEJ' EDUCATIOUN Widespread malnutrition and Literacy: EtSi. i)^ protein deficiency School enrollment(l 9 72 ): 133,500 UNP PE;i CAP1TA Pi 1972i $ 7 0-$yU9 OuTrI:uT AND LABOR FOUlEE % of GDP % or Labor Force Agriculture 7-80 80-90 Other sectors 20-30 10-20 GoVERNMBNT FINANCE (millions of rials) Prov. Est. Fr69 FY70 FY1 Fr72 Revenues 52 73 98 151 Expenditures 122 129 171 234 Oarrent Balance -70 -56 -73 -83 Development expenditureal/s2! -5t _ 3 Overall Balance -93 -137 -156 -139 Domestic bank financing 70 45 37 -j2 External financing 23 92 119 171 MONEY AND CREDIT (millions of rials) J u n e 1969 1970 1971 1971 1972 Money supply 190 230 292 269 374 Quasi money 5 8 32 36 45 Credit to private sector 19 29 70 55 108 Net claims on government 118 151 110 141 109 1/ Eqnivalent to foreign project and commodity aid. BALANCE OF PAYMENTS ($ millions) Jan.-June 1969 1970 1971 1972 Exports 5 6 6 - T- o s -66 -89 -72 -48 Invisibles and worker remittances 42 45 47 36 ~.dLi tLLL UVJiI.LV%A1.LL.IJ 6J CULLiQ Current Balance -11 -20 -13 5 7,T-IJUIAL --- 4 -.L IjO.J 1/ I-a-A II n-mlnebary capita'1/ '3 Reserves, changes (- increase) - -10 -18 -14 Reserve Position ($ millions) Net; I'WOUI'vFe ^fL keitalu-" DMB U750LW 9 1(t.-e (of which: Free Reserves) ( 1) ( 7) (23) (32)(June) RATE OF EXCHANGE (U.S. J per rial) Free market rate (average) 22 18 19 20 MERCHANDTSE EJr-OR S (MR-co-rded)-"YUY_ -average, VL Coffee 104 o Qat o.6 16 Cotton O6 16 Hides and skins 0.5 14 Other Oo6 L6 Total 3.7 100 EXTERNAL DEBT, June 30, 1972 U5$m1n. Public debt, incl. guaranteed 246 of which: disbursed (14) , Debt service due 1972/73, est. 10 3 Debt service ratio, 1972/73 est. 12% a' IBRD/IDA LENDING US$m1n. IBRD DA Outstanding and disbursed - - Undisbursed - 7.7 Outstanding incl. undisbursed - 7.7 1/ Includes SDR's aid errors and omissions. T/ Only about 50-60% of estimated total merchandise exports are recorded. 1/ Tlis estimate was provided to the IBRD in Sept./Oct. 1972, at which time data on the debt and debt service burden were still being assembled from various agencies. 4/ The debt service ratio is estimated on the basis of debt service as % of projected 1972 exports (including unrecorded) and net invisibles and remittances. I. INTRODUCTION 1. This report supplements and updates the IBRD/IDA "Memorandum on the Current Economic Position of the Yemen Arab Republic" (EMA-50a), dated April 20, 1972. That memorandum described the principal economic develonments since the issuance of the basic report entitled "The Economic Development of the Yemen Arab Republic", dated October 16, 1970. In con- traRt tn the undntinc emnhaqis of the Anril 1972 memorandum. this oresent report focuses more on the structural characteristics of the economy, and on the nrnhlems and nrosnerts for orowth= One annex to this renort summarizes the findings of the agricultural sector specialists on the economic mission of Septemhpr/ptncr 19792 Annther Annex desc-rihes the stattus of develonment planning and aid coordination, and a third annex describes the programs of nr4npinal do,nors of fvrei4n aid to Vemen. 2. This report makes no nttemPnt to ea1,unte the implications of the merger agreement concluded at Tripoli on November 28, 1972 between the Yemen Arab Repub-lic (YVAD ni the Peoples' Demvcrticj Republic of VYman (PnRpv) That agreement calls for the creation (within 18 months) of a single Yemeni state w 4i-t anoe presider.t, or,e captal, -n4 -4 nifie legistive, executiv and judicial institutions. In principle, unification could have significant ecor.om-ic ber.efits fLor both1 parties, though existir.g wide differences in political and economic policies, systems and institutions will have first to lUe reconciLLeJU. II. STRUCTURAL CHARACTERISTICS LLI.)X1&6 L A¢L dU AtpUUU.L±.. \1LLt&L6LUL LIL.L1 L=UICLI LOb 1MLUAL6 LS& A. L. developed of those twenty-five countries officially designated as "least developed" by the Uniteu N'ations. Un±ike most such couritr'Lte s, Yemen. LiS long been fully independent. But it also remained almost completely isolated rrom the rest of the world, until the overthrow of the Imam anu the found'ng of the present republic in 1962. The Imam followed a deliberate policy of u±scouraging contact wiLtn Lth ouLsiue wordu, anu the lack UL interInl trars- port and communications facilities also kept many parts of the country isolated from each other. Since the Revolution, the Yemen governLment has been much more outward-looking, and considerable progress was made in port, airport, and especially road construction over tne past decade. Development of the primary highway system should be completed by 1974, with the completion of the Sana'a-Saada road to northern Yemen and the paving of the Sana'a-Taiz road (see map). In spite of this progress, however, the secondary and feeder road network is still in an early stage of development, and Yemen remains extremely underdeveloped in virtually every other form of economic and social infrastructure. 4. It is difficult to quantify the degree of Yemen's underdevelopment and to judge adequately the country's economic performance and prospects. There are few demographic, economic or social statistics, and much of the -2- data published in the country's rirst Statistical Yearbook cannot be con- sidered reliable. There has never been a population or agricultural census, and very little has been done in terms of soil, water or mineral surveys. As of October 1972, there were no basic topographical maps, no national budgeting process, and only very limited data on production, distribution, prices or productivity. Even the data on external trade remain very un- reliable, owing to considerable trade which is smuggled or unreported for other reasons.
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