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Commentary Back Yemen’s Private Sector to Promote Economy Recovery

In light of ongoing negotiations between Saudi Arabia and the Houthi movement and reports of progress toward a permanent ceasefire, the need for a comprehensive and integrated approach to peace and reconstruction in Yemen is more urgent than ever. Any political solution must be paired with a robust economic strategy in order to tackle underlying economic and social issues, and prevent a surface-level fix to the conflict. Here, Yemen’s private sector can play a crucial role.

The Center for International Private Enterprise (CIPE), a Washington-based organization where I serve as Managing Director for Programs, sees the Yemeni private sector as a key driver of economic growth, poverty reduction, and the promotion of social stability in a post-conflict Yemen. The need is clear: Yemen’s economy has contracted by roughly half since the conflict began. The value of the local currency has dropped precipitously, and the banking system, with two competing central banks, is on the brink of collapse. The conflict’s impact on the population has been devastating, with over 23 million people (of a total population of 33 million) in need of humanitarian assistance, and over 17 million at risk of famine, according to the World Food Programme.

Despite these difficult conditions, the Yemeni private sector has shown remarkable resilience in its efforts to support those in need. It continues to play a critical role in providing goods and services to the population, and in job creation and livelihood opportunities, particularly for women and youth. Small and medium sized enterprises comprised about 90 percent of the economy in Yemen as of 2020. Corporations have also taken action to support the most vulnerable communities. For example, the telecommunications sector provides critical communication services to remote and hard-to-reach areas, while simultaneously providing employment to youths and those who have lost existing jobs because of the conflict. Transportation companies have also played a vital role in supporting besieged communities and rural settlements, despite road transport costs increasing 145 percent. These enterprises are essential in facilitating the provision of school supplies and other equipment to cities like Taiz, where community members have engaged private sector actors to create alternative routes to reach citizens. Other major businesses have supported the education sector through the rehabilitation of schools.

Still, Yemen’s private sector faces significant challenges. The conflict has long disrupted supply chains, making it difficult for firms to access raw materials and distribute products. The banking system’s collapse has limited firms’ ability to access credit and manage their finances. Currency devaluation has increased the cost of imported goods, and high inflation has reduced consumer purchasing power. The Yemeni Economic Reform Team (ERT), another CIPE partner that brings together business leaders and local economic experts, has proposed several measures to combat these problems. These include policy recommendations to stabilize the currency, reform the banking sector, and increase investment in infrastructure. The ERT has also called for easing restrictions on the entry of goods and commodities into Yemen and facilitating their distribution across the country by opening all roads without restrictions.

The international community, including the United Nations and the US special envoy for Yemen, can play a key role in supporting economic de-escalation and recovery. It should expand the technical assistance it already provides and be prepared to contribute funds in collaboration with Gulf countries to support reconstruction. In turn, Yemeni and Gulf leaders should approach reconstruction as a strategic investment in rebuilding the country, improving the economy, creating jobs, promoting regional stability, and realizing the long-term benefits of a peaceful, prosperous Yemen. It is crucial that political leaders engage the private sector, and carefully consider its input during the planning process, so that business leaders can be real partners in implementation. This need not wait for a final settlement: efforts to pair international support with local Yemeni expertise, and support economic development and recovery, should begin now.