Bloomberg News

Yemen Car Dealers Embrace Post-Saleh Security as Challenges Loom

February 24, 2012

Feb. 23 (Bloomberg) -- Auto-sellers in Yemen’s capital, Sana’a, are putting their shiny new cars back on display after months of hiding them from burglars and stray artillery shells.

Wael Issa, manager of a Sana’a dealership, says most sales last year were pickup trucks -- favoured by tribal opponents of former President Ali Abdullah Saleh, as they could be mounted with machine-guns and used to carry fighters. Issa says his customer profile will be a test of the accord, aimed at ending a yearlong uprising, that saw Saleh replaced by Abdurabu Mansur Hadi this week. “Once we start selling small sedans that Yemenis with office jobs use, you can say things are better.”

Hadi was elected unopposed on Feb. 21 as part of an internationally backed transition plan. He inherits an economy that was one of the world’s three worst last year, with Greece and Ivory Coast, as rebel attacks on oil pipelines hurt exports. Political challenges include secessionist movements in the north and south, street protesters demanding more fundamental change, and al-Qaeda militants who have used Yemen as a base to attack targets in neighboring Saudi Arabia and the U.S.

“Saleh’s departure is clearly a first, baby step toward answering Yemen’s multiple problems,” said Theodore Karasik, director of research at the Dubai-based Institute for Near East and Gulf Military Analysis. “Curing Yemen’s ills will take at least a decade” and require a national dialogue with the secessionists, he said in an e-mailed response to questions.

Shrinking Economy

The $40 billion economy shrank by at least 5 percent last year, Saadaldeen Talib, industry and trade minister in the interim government that took over in December, said in a Feb. 17 interview in Sana’a. Only Greece and Ivory Coast endured comparable contractions, according to International Monetary Fund estimates. The attacks on pipelines caused local shortages as well as hurting foreign-currency earnings.

Oil producers in Yemen include France’s Total SA, which said last week that output from the Masila field in Yemen was disrupted by a strike. Austria’s OMV AG said yesterday that halts in Yemen helped depress its output last year.

Yemen produced about 264,000 barrels a day in 2010, according to the BP Statistical Review of World Energy. Current daily production capacity is about 120,000 barrels following the pipeline attacks, according to Oil Minister Hisham Sharaf.

“I’m very optimistic about oil and gas and minerals in this country,” Sharaf said in an interview. “It has a lot of wealth underground. It needs at this time assistance from the world to establish security and stability.”

Transition Plan

Yemen’s oil-rich Gulf neighbors brokered the two-year transition plan, due to end with a new parliament and constitution. They will probably back up that diplomacy with enough cash to ward off further economic collapse, said Robert Powell, a Middle East and North Africa analyst at the Economist Intelligence Unit. He forecasts a rebound with gross domestic product increasing 4.4 percent this year.

Still, “it’s not an answer just to keep the country on a drip,” Powell said by phone from New York. Without security and political stability, Yemen won’t see the significant increase in foreign investment that it needs to spur economic growth, Powell said.

The agreement that led to Saleh’s departure has restored life to the capital, which saw some of the worst violence in the past year.

Last weekend, young men were decorating bridal cars with white tulle and red rosebuds, for wedding parties that were rare last year. A park closed during the fighting was packed with children on swings and families picnicking. In the old city, whose distinctive architecture has been likened to gingerbread houses, activity is returning to the jewelery, handicraft and spice stores lining its narrow, twisting streets.

Unrest, Violence

The rest of the country is still troubled by violence. Secessionists in the south and northern Houthi rebels refuse to recognize the post-Saleh government. At least four people were killed in election-day attacks on polling stations in southern provinces, the state-run Saba news agency said.

“Foreign investment is discouraged by the security situation, which is still very difficult in most of the country,” the U.K.’s ambassador to Yemen, Nicholas Hopton, said in an interview at the embassy. While there’s potential to develop industries such as fishing and tourism, progress won’t come until “it’s safer for people to operate here, which simply isn’t the case at the moment.”

Divided Loyalties

The army at Hadi’s disposal to tackle those security challenges was riven by divisions between Saleh supporters and opponents last year, with senior officers defecting to the rebels. There are similar splits inside government institutions, while many of the Yemenis who spent the past year calling for Saleh’s departure feel cheated by an accord that sees his party retain power, via Hadi, and half the seats in Cabinet.

At the demonstrators’ main camp in central Sana’a, Talal al-Sadri warned that replacing Saleh with Hadi isn’t enough, and said activists will remain vigilant.

The transition plan fell “way below our expectations,” al-Sadri said, likening it to anti-virus software installed to protect a system that should have been wiped clean instead. “We wanted a complete regime change,” he said.

--Editors: Ben Holland, Digby Lidstone.

To contact the reporter on this story: Donna Abu Nasr in Sana’a, Yemen, at dabunasr@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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