Yemen's dire economic situation has been further exacerbated by the security and political commotion in the aftermath of the Houthi coup d'etat against the legitimate government in late 2014. The Saudi-led coalition launched its airstrikes campaign codenamed Operation Decisive Storm on 26  March 2015 against the Houthi rebels to restore the government's legitimacy. The military operation was brought to a close on 21 April, and in its place, a new phase of operations, known as  Operation Restoring Hope, was put into action.  

As its name indicates, the ongoing Operation Restoring Hope was designed to restore hope for the Yemenis and combine military action with political efforts in order to continue to protect civilians, fight terrorism and the Houthis and intensify relief and medical assistance to the Yemeni people in the affected areas. "Operation Decisive Storm has achieved its goals… With its end, the new Operation Restoring Hope begins with the following goals: continuing to protect civilians, continuing to fight terrorism and continuing to facilitate the evacuation of foreign nationals and to intensify relief and medical assistance to the Yemeni people," said the official Saudi-led coalition statement.

While these developments were taking place on the ground, Yemen's Foreign Minister Riyadh Yassin said that Yemeni officials  were  studying with Gulf countries an "Arab Marshall Plan", for reconstruction in Yemen. Yassin was referring to the US program that helped rebuild Europe after World War II and turned Europe into a major global economic power.

Yemen's Economy before Operation Decisive Storm

Historically, Yemen's economy suffered structural imbalances in the aftermath of the unification of Yemen in 1990 where the newly-formed Republic of Yemen inherited the problems of both the capitalist economy of North Yemen and the socialist economy of South Yemen. A few years later, Yemen's deep economic problems were aggravated by the civil war which broke out in 1994 where the country's foreign debt increased, foreign investments fled the country, the deficit in the balance of payments went up, inflation soared and the standard of living went down significantly.

The successive Yemeni governments were unable to put in place effective economic reforms as they wrongly believed that their plans were successful due to the fictitious economic improvement resulting from oil revenue. That is because economic growth was based not on a sustainable policy for  production but on temporary oil revenue where the energy sector accounted for 25 percent of Yemen's  gross domestic product (GDP), 70 percent of the government revenue and around 90 percent of the country's exports.

In addition, Yemen's economy suffered several shocks that posed a significant threat after 2011 forcing capital to flee the country, triggering trade and industrial slowdown and leading to the collapse of the investment sector. The security, political and economic environment factored in to repel both national and foreign investments.

It is therefore safe to say that the Yemeni economy underwent systematic destruction and vandalism where it ended up in the grip of a complicated and overlapping web of elites controlling the oil sector and that some of whom are even effective actors in the current crisis in which the economy is shackled with the huge burdens revealed in the following figures:

• The deteriorating security situation led to US$7 in losses in the budget.
• Oil revenue recessed 37 percent to US$1.6 billion by the end of 2014 from US$2.6 billion by the end of 2013.
• Foreign currency reserve  declined by 12.8 percent to US$4.6 billion by the end of December 2014 and has continued to drop for the sixth month in a row to reach an all-time low of US$4.3 billion, which is not enough to cover Yemen's imports for more than four months.
• The public budget deficit grew by 8.24 percent (around 679 billion Yemeni riyal) in 2014, due to receding revenue, up from 7.8 percent in 2013.
• Yemeni economy is losing around US$4.7 billion every year because of tax evasion.
• Inflation soared to 9 percent in 2014 and the population grew 3 percent.
• Unemployment rate grew steadily from 25 percent, before 2011, to 33 percent in 2011, and reached 44 percent in 2014. The rate is expected to rise to 60 percent by the end of this year.
• Fifty percent of Yemenis live on less than one dollar a  day. The poverty rate has been soaring. According to a report by United Nations Children's Fund (UNICEF) in February 2015, 60 percent of the population of 26 million,  live  below the poverty line.

The flow of international aid and foreign investment came to an end, which is evident as follows:

1. Foreign investment Fleeing Yemen - International oil companies suspended their operations in Yemen due to the political commotion. Also due to the developments, Yemen also lost Saudi investments estimated at US$4 billion in more than 100 projects. Gulf government and private investment account for 70 percent of the total FDI in Yemen, and therefore Yemen's negative economic growth is projected at more than minus 12 percent in this year.

2. Donors suspend international aid - Due to the worsening political and security situation in Yemen, several donors suspended aid to the country. The donors pledged US$7.9 billion in aid to Yemen at donor conferences in London and Riyadh in 2012. Yemen has not received more than 60 percent of these pledged funds. In addition, the World Bank suspended operations in Yemen following a thorough review of the impact on Bank programs of recent political and security developments. The suspension applies to the Bank's portfolio in Yemen which consisted of 35 projects with US$1.1 billion in net commitments. The Bank disbursed only US$27 million of the additional funds of US$269 million pledged in the past two years.

The suspension of  international aid is expected to inflict catastrophic damage to the economic and social situation in Yemen, including worsening unemployment and poverty. According to a survey by United Nations OCHA (Office for the Coordination of Humanitarian Affairs), the shortage of aid and grants means that more than 10.5 million Yemenis continue to be food-insecure, 850,000 under-five children continue to be acutely malnourished, a further 8.4 million poor Yemenis continue to lack access to basic healthcare, and that an estimated 13 million people will lack access to safe drinking water and proper sanitation facilities.

Operation Restoring Hope and Yemen's Economy

The commitment of the coalition member states of Operation Decisive Storm to saving Yemen through military ways does imply that they are committed to back and save the country through economic aid and development efforts. Operation Restoring Hope reiterated that relief and humanitarian aid efforts will be intensified to help the Yemeni people and allow international aid agencies to run their operations.

Operation Restoring Hope was associated with the announcement of  a "Marshall Plan" to re-build Yemen's economy. On 19 April,  Yemen's Foreign Minister Riyadh Yassin announced "The Salman Developmental Project for Yemen". The prelude, he noted, was in the Saudi King Salman bin Abdulaziz Al Saud's announcement of US$274 million in development  aid to Yemen. He also said that US$8billion in funds were committed for development in Yemen by Gulf countries with Saudi Arabia being the largest contributor.

The following arrangements and  initiatives were part of efforts to back Yemen's economy:

1. A joint technical commission for determining the development needs of Yemen held an extraordinary meeting on 3 May 2015 to confirm that there is response to Yemen's urgent needs for support for its electricity, water and healthcare services.
2. During the 15th consultative meeting of the GCC leaders in May, King Salman bin Abdulaziz of Saudi Arabia announced the establishment of a center for relief and humanitarian works to organize delivery of aid to Yemen.
3. Saudi businessmen and investors pledged to pump US$5 billion in development investment in Yemen to fund reconstruction after Operation Decisive Storm.

Structural Challenges Facing Reconstruction of  Yemen's Economy

Despite the hope that was created by GCC through these steps, persisting challenges hinder efforts to achieve their goals, namely:

1. The extent of donors' commitment to honor their pledges. Saudi Arabia alone cannot carry out the mission of reinvigorating the Yemeni economy.
2. The ability to achieve balanced development,  both region-wise and sector-wise, to eradicate poverty and achieve social justice.
3. Restoring the role of the state at the economic, social and security levels.
4. Putting an end to attacks on oil pipelines through re-structuring and re-deployment of the military and security forces.

Therefore, experts stress that in order for a Gulf Marshall Plan/ King Salman development plan to be able to achieve its goals, the implementation should start with the fastest priority sectors to revive the economy at the following two levels:

At the Strategic/political level:

• Agreement on a political vision that ensures commitment to prevent the deepening of the existing economy problem in Yemen. 
• Achieving social and economic justice, fighting all types of corruption and building a governance system to promote integrity.
• Setting up an impartial technical economic commission to develop, and put in place urgent solutions to Yemen's economic problems.
• Cooperation with the international community and donors to implement and finance the required solutions.
• Enabling Yemen to make a qualitative leap through focusing on investment in education, building institution in  the medium term, and adopting economic projects that are more strategic, in the long term.

At the Sectors Level:

Experts propose that GCC plan should be largely focused on Yemen's fastest recovering economic sectors. This includes restoring foreign investment in sectors like oil and gas, tourism, services, industry and small enterprises. The start could be with drawing up mechanisms to implement the following proposals:

• Approving an emergency development plan with the main goal of increasing employment, and the secondary goals of production, investment and the optimal use of resources.
• Backing the security and defense sector and countering security challenges to help restore foreign investment, in particular to oil and gas sectors, in order to ensure a fast increase in  country's revenues.
• Focusing on industrial and labor-intensive sectors.
• Reviving infrastructure projects and increasing funds for them.
• Reviving the tourism sector and exploring new opportunities in this sector.
• Increasing investment in the services sector and taking advantage of Yemen's unique geographical location to boost maritime and logistics operations.
• Reinvigorating manufacturing industries and incentivizing GCC investors to back Yemen through their investments. This would encourage other foreign investors to resume investment in other sectors.
• Providing jobs and reinvigorating local productive sectors and supporting competitiveness, which requires more Small and Medium-sized Enterprises (SMEs) and micro-enterprises that can absorb unemployment.
• Bolstering economic ties between Yemen and GCC countries, Saudi Arabia in particular.

On a final note, no doubt the Houthi coup d'etat against the legitimate president Abdrabbuh Mansour Hadi has further aggravated the already worsening economic situation. If the Saudi-led Operation Decisive Storm, in which other GCC and Arab countries are taking part, is achieving its military goals in Yemen, Operation Restoring Hope is not less important.  Operation Restoring Hope seeks to foil the Houthi plans and their foreign and domestic supporters, and enable the legitimate and internationally-recognized government to exercise its power, in addition to the support extended to President Hadi by GCC and Arab states to re-build the Yemeni economy, develop the country's infrastructure and elevate the level of basic services for the people of Yemen.