The Republic of Yemen was established on May 22, 1990 upon the merger of the Yemen Arab Republic and the People's Democratic Republic of Yemen. The latter's moribund Marxist economy, coupled with the loss of its main patron, the former Soviet Union, served as key factors impelling the union. The sentiment is strong among both Yemeni and foreign observers that, notwithstanding deep social and political divisions arising from the unification of Marxist South Yemen and non-Marxist North Yemen, the merger will hold. A 30-month transition period has been set aside to ease the process.
The tremendous difficulties attendant to the joining of two dissimilar economic and formerly antagonistic political systems have presented daunting challenges. Rather than risk the social unrest that might have come in the wake of dismissal of public employees made redundant by unification, the Republic of Yemen decided to merge the two bureaucracies and thereby retain all employees on the government payroll. Some confusion and bureaucratic paralysis have resulted, leading some companies of the favored petroleum sector to remark that dealing with the government now is more difficult and time consuming than was the case prior to unification. The situation is improving, but complaints continue to be voiced about increased inefficiency and convoluted procedures.
It was agreed prior to unification that President Ali 'Abdullah Salih, former President of the now defunct Yemen Arab Republic, would become President of the Republic of Yemen, and Ali Salim al-Bidh, former Secretary General of the Yemeni Socialist Party, would be Vice President. Soon after unification, a fivemember Presidential Council and 38-member cabinet were established, drawing a balanced membership from the north and the south. All laws, agreements, and treaties observed by the two constituent states before unification have been assumed by the Republic of Yemen. A constitution was drafted and approved on April 16, 1991.
GEOGRAPHY--With a total area comprising 327,341 square miles, the Republic of Yemen is approximately twice the size of Wyoming. Its population of roughly 12 million is growing at a rate of 3.2 percent per annum.
Sanaa, the former central city of the Yemen Arab Republic, has been chosen as the seat of government of the Republic of Yemen. Aden, the port-cum-refinery city situated on the southern coast, has been designated the economic and commercial capital. Both cities play a major role in the development of the Republic of Yemen.
Topographically, the country is largely desert. Only about 6 percent of the land is arable. Forest and woodland cover 7 percent, while 30 percent of the country consists of meadows and pastures. Along the 1,186-mile coastline, temperatures can reach 120 degrees fahrenheit with 80 percent humidity during the summer months. From October through April temperatures are mostly warm and pleasant. In winter, inland temperatures can be extremely cold at night.
ECONOMIC OVERVIEW--The unification has combined the constituent states' positive and negative economic at tributes, yielding a mixed economic overview. The south's economy has grown at an average annual rate of 2 to 3 percent since the mid-1 970s, while the north has averaged 5 percent since 1984. The law level of domestic industrial and agricultural output has made Yemen dependent on imports for virtually all of its essential needs. A shortage of most natural resources, a widely dispersed population, and, particularly in the south, an arid climate, make economic development difficult.
On the positive side, oil exports begun in 1987, originating in the north, continue to flow. Recently, attention has been directed to exploring for oil in the south.
The Republic of Yemen agreed to assume the international obligations of the two former countries, bequeathing the unified nation a combined official debt of approximately $7 billion. As a point of comparison, the Republic of Yemen's gross national product in 1990 was estimated at $6.6 billion.
Economic aid has played a major role in Yemen's development for some time. However, as a result of the Republic's position on the Gulf Crisis, its main aid donors--Saudi Arabia, Kuwait, and the other Gulf states--halted new assistance and cut back many aid programs in the pipeline. It is too early to tell if and when aid will return to pre-crisis levels.
Population shifts, largely a result of the Gulf Crisis, have also had an impact on the economy. Expatriate remittances supplied the Yemenis with much-needed hard currency. With the return of an estimated 750,000 to 1,000,000 Yemeni workers and their families from Saudi Arabia and other Gulf countries, Yemen's remittances have fallen drastically. Additionally, a population increase in 1991 of 8 percent forced the government to increase food imports beyond normal import levels, thus depleting an already low hard currency supply.
To date, a large number of the Yemenis who returned have not been absorbed by the economy and remain unemployed. Some of the returning expatriates have invested their money in the service sector, particularly small shops, restaurants, and taxis; few have invested in manufacturing or other export-oriented activities. More than half of the Republic of Yemen's population is employed in the agricultural sector.
Since unification, the government has fixed the Yemeni Rial (YR) at a rate of 12 YR=US$1, while the parallel market rate has increased to 27 YR=US$1. The government's unwillingness or inability to control the flourishing parallel market for rials has meant that virtually no foreign exchange except that from the oil economy is entering its coffers. Firms given import licenses are told to buy foreign exchange from the parallel market. Yemen has little foreign exchange to finance even urgently needed development projects. Financing remains a major concern for any project requiring foreign exchange.
Yemen's natural resources include crude oil, fish, rock salt, marble, and small deposits of coal, gold, lead, nickel, and copper. Yemen's chief exports are crude oil (approximately 130,000-40,000 b/d), cotton, coffee, hides, vegetables, skins, and dried and salted fish, earning $750 million annually. Key imports are textiles and other manufactured consumer goods, petroleum products, sugar, grain, flour, other foodstuffs, cement, machinery, and chemicals.