Aiman al-Eryani

To avoid past mistakes, invest in Yemen’s agricultural sector

June 2021

Yemen’s current famine and economic collapse underlines the importance of a robust agricultural sector. To avoid future repetition of the existing situation, any plan for Yemen’s development must involve investment in its farmers and in the infrastructure that is desperately needed to commercialize output. Yemen already has the gift of a large population, and this needs to be much better utilized. Lessons from the 1970s can be learned, argues Aiman al-Eryani. If government institutions invest in agricultural infrastructure and better manage water resources, the sector can recover. But this comes with the caveat that, ultimately, no single policy will be as effective as finding a sustainable solution to the current conflict.

Yemen’s rural areas are inhabited by nearly 70 percent of the population. Half the country’s labor force is employed in the agricultural sector, and 70 percent of the Yemeni population relies on income from agricultural activities. But despite this, the agricultural sector has for a long time not fed the country’s population, leading to Yemen importing 90 percent of its food needs. An explanation lies in the fact that the sector has been underserved by authorities, receiving a declining share of public expenditure. The root of many of the sectoral issues lies in the 1970s, when northern Yemen, where most agricultural land lies, exported much of its labor force in order to live off large remittances. This resulted in the neglect of vital farmland. The agricultural industry’s stagnation was further compounded by policy failures, conflict, the discovery of oil, and externally imposed structural adjustment programs. More recently, a further issue has arisen in the form of Yemen’s most serious environmental issue – water scarcity.

Today’s policymakers can learn from the problems the country’s agricultural sector faced in the 1970s. During that period there were dramatic changes to the dynamics of the Yemeni economy. The huge outflow of labor to neighboring oil-producing countries led to an explosion in remittances and created an unusually capital-abundant but labor-short country. Instead of using this capital to diversify the economy and boost the agricultural sector, the Yemen Arab Republic took a laissez-faire approach, allowing cheap imports to flood in and construction to boom, all at the expense of the country’s existing farmland. This prosperous decade was a missed opportunity, one that could have turned Yemen into an agricultural powerhouse in the region. However, it also offers some instructive lessons for today’s policymakers.

A continuous theme from the 1970s to the present is Yemeni governments’ continued neglect of the agricultural sector. Time after time, as the government finds an easy and non-sustainable source of revenue, Yemeni farmers fall by the way side. While encouraging growth in this sector is both difficult and complex, it is the more sustainable option, providing economic growth, export potential, and sustainable livelihoods for a significant portion of the Yemeni labor force.

Workers in the Gulf, money and food from abroad

Yemen has historically been a major supplier of labor for Arab Gulf countries, but the oil boom of the 1970s turned a trickle into a torrent, with Yemeni workers flooding the underserved labor markets of its neighbors. The result was a huge increase in remittance funds: private transfers reached a peak of USD1.39 billion in 1977, making up a whopping 77 percent of gross domestic product (GDP), according to the Central Planning Organization.

There were upsides to this: education rates increased, for example, along with various health and wealth indicators. However, it also had the unintended consequence of concentrating the economy away from agriculture and creating a chronic and acute dependence on imports – both of which continue to this day.

The rise in remittances meant Yemenis had more capital, but as there weren’t many avenues for local investment in the country’s undiversified economy, they could only really spend that money in one of three ways: buying land, building a house, or opening a small retail business.

Besides qat cultivation, agriculture became unattractive

The result was a rapid growth in construction, especially in urban areas, leading to increased prices and wages in the sector. This made work in the agricultural sector – where wages and prices were already suffering due to a glut of cheap imports – even more unattractive. A vicious cycle began, with agricultural output declining and reliance on imports increasing. Those still investing in farmland focused on luxury crops such as qat, which yielded more profit, at the expense of other more environmentally sustainable and useful crops, such as cotton, sorghum (a kind of grain), and coffee. Agricultural investment became unattractive, unless someone had the means to provide the necessary infrastructure and planted the more lucrative qat plant.

The numbers speak for themselves. From 1975 to 1980, the value of imports nearly tripled from 3 billion Riyals to 8.35 billion Riyals, while local agricultural production steadily fell. Cotton, for example, was once booming with production reaching over 25,000 tons, but dropped sharply from 1974 as the labor force decreased, and farmers favored planting qat as cotton was an equally water-hungry crop. Coffee production which should have been growing, along with many other crops, would eventually be either edged out by qat or stagnate.

Soaring land prices fueled by the construction boom and the difficulty of using machinery in central and northern Yemen’s terraced farmland also meant there was very little incentive for either state or private investment in the agriculture sector. Legal and social norms also played a factor: disputes over water resources made farming complicated and expensive, while social norms discouraged families from selling land to outsiders, even distant relatives.

Yemen undergoes structural reform after millions of workers are forced to return

By the mid-1980s, the extent of import dependency was clear, prompting both North and South Yemen to introduce policies to try to tackle the situation. These had some effect, with a decrease in imports in the late 1980s and early 1990s, but were rendered largely irrelevant by other events.

Yemen discovered oil at the same time as a major contraction in oil revenues during the 1980s. Oil constituted the majority of the Gulf region’s output, and when oil prices fell, so did the need for laborers. Around two million Arab workers were expelled from various Gulf countries, half of whom were estimated to be Yemeni. This was due in part to Yemen’s vote as a non-permanent member of the United Nations Security Council against the use of force in Iraq during the 1990–91 Gulf War – an unpopular decision among its neighbors and one that also led to the cessation of foreign aid to the newly unified Republic of Yemen. A civil war erupted in 1994, increasing unemployment and inflation and widening the budget deficit. As a result, GDP per capita decreased from USD686 in 1990 to USD281 in 1996.

In 1995, as a condition for much-needed loans, the International Monetary Fund and the World Bank forced the Yemeni government to implement an economic, financial, and administrative reform program aimed at reducing the budget deficit and inflation and stabilizing the exchange rate. It met with some success; however, as with many of the externally imposed structural adjustment programs at the time, these achievements came at the cost of a significant reduction in government spending and a massive increase in poverty. Unsurprisingly, agricultural sector stagnation was not addressed amid the chaos, and import dependency continued unabated with food insecurity growing.

Import qat, and grow drought-resistant crops instead

Going forward, government investment should be focused on building the institutional infrastructure needed to commercialize agricultural products. This could be in the form of public corporations that buy, market, distribute, and export local produce, as well as control imports. Such agencies can provide price stabilization schemes to protect farmers from commodity price volatility, subsidize prices on the consumer side to counter food insecurity, and also provide financial incentives to make agricultural work more attractive. While public sector marketing agencies can be inefficient and open to corruption, they are the most appropriate solution for Yemen, which currently lacks the conditions required for private companies.

Better water resource management is also an essential part of any policy package that aims to improve agriculture in Yemen. Government involvement in this area is vital, mainly because it would provide a way to prevent so much of the water being used to grow qat. Qat cultivation currently takes up more than half of agricultural land in Yemen and is responsible for significant water depletion in the country. While banning the growth of this edible stimulant plant would be deeply unpopular, encouraging qat imports from neighboring countries might be an option. This would reduce demand on scarce water resources and the hefty cost of drilling for water on farmers. Encouraging qat imports is not a new policy proposition and has been studied in the past, although never implemented. At the same time, the government should also encourage the reintroduction of more environmentally suitable crops, such as the drought-resistant sorghum, which was a much more popular staple crop before the introduction of wheat.

There is, unfortunately, a caveat to all of this: it would be impossible to implement any such policies without a sustainable solution to the conflict in the country. This remains the biggest issue for millions of Yemenis. Only a sustainable and long-term solution to the fighting will enable the creation of strong and transparent government institutions that can finally work towards putting the limping agriculture sector back on its feet after so many decades of neglect.

Aiman Al-Eryani is a consultant for Yemen Policy Center, with an interest in Yemeni workers’ labor and capital flows and their effect on agriculture in Yemen.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect those of the Yemen Policy Center or its donors.

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