Unlocking the Potential of the Private Sector in Yemen

Unlocking The Potential Of The Private Sector In Yemen

The conflict in Yemen has reversed decades of development progress, fracturing already weakened state institutions. Despite facing years of violent conflict, the private sector in Yemen has somehow managed not only to survive, but to play a crucial role in keeping the economy afloat and addressing what could have been a much worse humanitarian disaster. While Yemen’s conflict is now classified as a protracted one, it is moving towards much lower levels of armed violence, presenting opportunities to support and engage the private sector more effectively, to catalyse economic activity, and help the country transition away from dependency on humanitarian relief.

While the private sector is the main source of employment and tax revenue in the country, it also plays a crucial role in supplying essential goods, upskilling the workforce, driving innovation, and providing critical infrastructure. Therefore, as in any other conflict-affected situation, the private sector in Yemen is critical to overall economic stabilisation and its growth appears to be a prerequisite for post-conflict recovery. Even during the conflict, the majority of private sector firms surveyed were able to retain their employees, with large and medium-sized businesses being the most capable of creating and sustaining jobs. Maintaining existing jobs and creating new ones is critical not only for livelihoods during the ongoing conflict but also for preserving workforce skills which are a key requirement for post-conflict recovery.

As well as the contributions of the private sector through their business operations, the study highlights the philanthropic role carried out by private sector-funded charitable and development foundations such as food distribution, infrastructure rehabilitation, funding the construction and/or operation of public education, health, and water facilities, and funding for training programmes, particularly for youth and women. Local private firms have also collaborated with the international community to establish such crucial institutions as the Yemen Food Bank and the Yemen Medicine Bank.

Furthermore, the private sector’s deep connections to local communities and its long-term driven strategies provide it with local legitimacy and trusted networks that run deep across governorates, villages, tribes, and markets. This provides a seldom-tapped potential for the private sector to play an important role in ongoing peacebuilding efforts. It has done so in a few cases in Yemen, such as the mediation efforts by private sector actors in relation to the FSO Safer oil tanker crisis, the advocacy for food security in light of the Ukraine crisis, and the behind-the-scenes efforts to de-escalate and contain the impact of the diverging and sometimes conflicting policies in the banking sector.

This study provides a comprehensive analysis of private enterprise during Yemen’s long-standing conflict since 2015. It traces the impact of the conflict on Yemeni firms, while highlighting their ongoing contributions to the economy. Given the collapsing public sector capacity due to the conflict, private sector firms have stepped in and are playing a larger role in provision of services such as health, education, and electricity. But perhaps the most critical role played by the private sector has been its role in preventing widespread famine. Not only has the vast majority of food been imported to Yemen by the private sector (estimated at 85% of imported food in 2020), but the private sector has sustained the whole food value chain: from banks striving to maintain international banking relations to pay suppliers, to shipping companies navigating the complex shipping requirements to the ports of Yemen, to transport firms adapting to mounting challenges of inland transportation, to food manufacturers and processors maintaining their operations, and finally to the wholesale and retail sectors keeping food on the shelves across the country.