Strife-Torn Yemen Tops The World's Worst Economies

17/7/2012 -


Source : Forbes  

Twice within a month this spring, militants knocked out the pipeline leading to a $4.5 billion liquefied natural gas plant built by France’s Total  in Yemen. Weeks later Total was still negotiating with local tribes to get its crews in to repair the pipeline and restart the 6.7 million-ton per year LNG plant, a key component in Yemen’s efforts to supply more energy to its citizens and diversify its economy away from crude oil.

Total needed to obtain signed agreements “with more than a dozen sub-tribes and splinter groups” before it could attempt repairs, an industry source told the International Oil Daily.

Such is life in Yemen today, as the oil-rich nation struggles with rebellious tribes, a resilient al Qaeda franchise, and U.S. drones in the air that inspire bloody acts of retaliation on the ground. The turmoil has cost Yemen more than a quarter of its oil production and helped place it atop this year’s list of The World’s Worst Economies.

Second on the list is Syria, a similarly strife-torn Arab nation whose economy shrank by at least 6% last year as dictator Bashar al-Assad drew stiff international sanctions over his bloody military attacks on his own citizens. Third is Sudan, a perennial contender for Worst Economy honors. New to the list this year is Pakistan, whose economy has suffered from a poisonous combination of stagnant per-capita income and high inflation.

To construct the list, we pulled a broad range of economic statistics from the International Monetary Fund, supplementing with other sources including the CIA World Factbook, the U.S. State Department and various development organizations. This list is not exhaustive; North Korea is clearly the world’s worst economy but with no reliable statistics we can’t compare it with the rest of the world.

We used three-year averages for per-capita income and GDP, to smooth out temporary changes. Countries with low per-capita incomes, growing populations and high inflation do the worst by this measure, and thus Africa tends to contribute more than its share of weak economies. A country’s natural wealth has little to do with whether it will land on the World’s Worst Economies list; resource-rich countries like Yemen and Chad make it solely because of their own mismanagement.

With per-capita income of $1,418 and an estimated adult illiteracy rate of 45%, Yemen ranks among the poorest countries on earth. This despite the fact that Yemen has 3 billion barrels of oil, providing about a quarter of the country’s $63 billion GDP and 70% of government revenues. Attacks by al Qaeda and militant tribes helped trim oil production by 125,000 barrels a day last year amid widespread violence that also led to the resignation of longtime leader Ali Abdullah Saleh.

 “In a sense, what Yemen has gone through is a perfect storm,” said Barbara Bodine, a professor at Princeton University’s Woodrow Wilson School of International Affairs and U.S. ambassador to Yemen from 1997 to 2001. “Political turmoil has been devastating to Yemen, as it was for Egypt and Libya, but you’re talking about a country that was bouncing along the bottom already.”

Yemen has some advantages over neighbors like Syria, Libya and Afghanistan, Bodine said, including a relatively cohesive population that is even split between the Shaf’I and Zaydi sects of Islam. The tribes can be a problem for foreign investors like Total, because they demand firm commitments of employment for their members in exchange for safety. But it’s only a difference in degree, not kind, from the pressure some cities put on companies like Wal-Mart before they are allowed to expand.

“It’s a little less polished in Yemen,” she said.

The country has possibly the world’s best natural harbor at Aden, a deep anchorage within the remnants of an ancient volcano. But Yemen has difficulty attracting investment because of its reputation for danger – enhanced by the U.S.S. Cole bombing in Aden harbor in 2000. Meanwhile UNICEF and OXFAM have warned of a growing crisis as nearly 10 million people lack sufficient food and 40% are below the poverty line. With a youthful population growing at more than 2% a year and widespread illiteracy, Yemen faces economic catastrophe if it doesn’t improve its educational system and diversify its economy, now largely based on subsistence farming.

Syria, in second place, is in such turmoil that the IMF doesn’t even supply up-to-date statistics. We examined other sources including IHS Global Insight, which recently forecast another 6% contraction in Syria’s economy for 2012 as the embargo on Syrian oil exports that was put in place in November 2011 continues to hurt GDP.

Inflation has climbed past 20%, meanwhile, as the country struggles with import restrictions and a severe drought that has cut domestic food production.

 “The pace of food-price appreciation accelerated dramatically, rising 39.3% year over year, up even more from the already worrisome pace of 27.1% seen in February,” IHS said.

Coming in third is Sudan, a perennial member of our list of the World’s Most Corrupt Countries. The North African nation joined the World’s Worst Economies this year after losing its oil-rich southern provinces, which supplied three-quarters of its oil production. South Sudan seceded from the north a year ago after a long civil war. Now Sudan has a per-capita GDP of $1,400, ranking it 136th among the 184 countries Forbes surveyed. (The richest country was Qatar, with per-capita GDP of $103,000, while the U.S. came in 12th at $49,600.)

The next two countries are Swaziland, making a repeat appearance; and Pakistan, whose per-capita GDP averaged just $1,282 over the past three years as inflation roared at close to 13%. Pakistan’s GDP has been growing at a little more than 3% a year, while its population, estimated by the World Bank at 176 million, continues to expand at  1.8% a year. The CIA World Factbook notes that Pakistan’s poverty rate is close to 50% and the country has difficulty attracting foreign investment. One bright spot: the $1 billion or so expats send to their relatives each year.

Next comes Jamaica, still struggling with the effects of the global financial crisis on its tourism-driven economy and declining prices for its bauxite exports. Jamaica’s per-capita GDP of $5,600 puts it firmly in the middle of the world’s nations but it shows up on our list because the economy contracted in 2010 and still shows anemic growth and a high current-account deficit. The IMF predicts Jamaica’s economy will grow at less than 2% a year through 2017, while the government struggles with debt that exceeds 120% of GDP. Jamaica’s dollar has fallen 20% in the last three years to 1.13 U.S. cents.