Yemen - Domestic policy

As one of the poorest countries in the region, Yemen is highly dependent on foreign economic aid and remittances from Yemenis working abroad. The economic situation, however, was helped enormously by the discovery of oil in the summer of 1984 in the border area between the two Yemens. In January 1989, the two countries established the Yemeni Company for Investment in Oil and Mineral Resources for the development of the oil fields along their common border.

In 1999, like other oil-producing states, Yemen—where oil accounts for more than 80% of exports—was hard hit by falling world oil prices. The government's income was cut in half, necessitating major budget cuts, and unemployment was in the double digits. Low oil prices also endangered another major source of Yemeni income—remittances by Yemenis working abroad, since the neighboring Gulf states that usually host these workers were in trouble themselves. Adding to the nation's problems, Yemen's tourist industry, which normally plays an important role in its economy, was endangered by a rash of kidnappings and killings of Westerners that had been brought to the forefront of public attention by a major kidnapping incident at the end of 1998.

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