Stabilizing Yemen will test stamina of donors

BEIRUT (Reuters) - For once the world is attending to Yemen, thanks to a botched al Qaeda attack on a U.S. airliner.

Western and Arab donors met in London last week to translate their alarm about the threat from Yemen-based militants into practical help to President Ali Abdullah Saleh's government.

They will need to keep up a concerted, long-term effort to help Yemen defeat the poverty, conflict and corruption on which Islamist radicals thrive if they want to reduce the risk of more assaults like the December 25 attempt to bomb a Detroit-bound plane.

The task is as delicate as it is daunting because, as Secretary of State Hillary Clinton hinted, the wily Saleh's style of governance is itself part of the mess Yemen is in.

"Yemen must take ownership of the challenges it faces," she said, urging the Sanaa government to enact reforms, combat corruption and improve the business and investment climate.

The United States and its allies have sought to assist Yemen before, only for interest to falter after initial gains.

"Al Qaeda in the Arabian Peninsula (AQAP) emerged in Yemen partly because the U.S. phased out its support after most of the 'first-generation' jihadis were successfully locked up," said Philip McCrum of the Economist Intelligence Unit in London.

Similarly, past efforts to spur economic and social progress in Yemen, which ranks 140th out of 182 countries on the U.N. Human Development index, have run aground: a 2006 donors conference pledged $4.7 billion but little has been spent, partly due to Yemen's incapacity to absorb the funds.

No new money was promised in London, but Yemen's rich Gulf Arab neighbors said they would meet in Riyadh on February 27-28 to consider "barriers to effective aid" -- which include corruption -- before discussing reforms with the Sanaa government.

McCrum said Gulf oil producers were more directly exposed to security risks seeping from an unstable Yemen than the West.

"They have the most to lose should Yemen fail and the most to gain should they manage to stop it tipping over the brink."

For its part, Yemen promised to work on reforms and to start talks on a programme with the International Monetary Fund (IMF).

"This is a step forward, but does not really deal with the issue of widespread corruption," said Pauline Baker, president of the Washington-based Fund for Peace. "That is at the heart of the dysfunction of the Yemeni state and must be part of the reform agenda if the country is to begin to stabilize."

PATRONAGE NETWORKS

Saleh has stayed president for three decades partly by manipulating a complex web of patronage to keep the support of powerful tribes and military and security elites.

Persuading him to unravel that web and curb cruder forms of graft will be among the tough challenges for a new international "Friends of Yemen" reform group due to start work in March.

Abdul-Ghani al-Iryani, an independent Yemeni analyst, said restoring stability required such a coordination mechanism among Western and Gulf donors, especially Saudi Arabia.

"With this, Yemen now has the world as its ally in tackling the deep structural distortions in its political system. This is an opportunity that must not be lost," he said.

The West seems to have heard the Yemeni government's message that a narrow security focus on al Qaeda cannot rescue a country racked by a northern revolt and separatist unrest in the south.

Economic weakness fuels these conflicts. Yemen's prime minister estimates unemployment at 35 percent. Oil output is falling and a water crisis threatens the future of 23 million Yemenis, whose number swells more than 3 percent a year.

"Crude oil output, the mainstay of government revenue and exports, has been in decline since 2000. Barring major new discoveries, exploitable oil reserves could be exhausted in a relatively short period," said an IMF note on Yemen last week.

New gas exports will provide some cushion for dwindling oil, it said, but noted that lower crude prices and output, coupled with weaker foreign direct investment and remittances, had already put pressure on Yemen's fiscal and external accounts.

Christopher Boucek, an associate at the Carnegie Endowment for International Peace, said foreign powers had taken an important first step by agreeing to work together on Yemen.

"This will need to be followed up with sustained and thorough concrete action. Focus on the systemic challenges confronting Yemen, including a failing economy and numerous human security dilemmas, is vital in order to address the grievances that fuel militancy," Boucek said.

Without international help for the Sanaa government, he added: "Yemen's problems will not stay in Yemen."

Nearly half of all Yemenis live on less than $2 a day -- and al Qaeda is exploiting their despair, Yemeni officials say.

"In Yemen, cash trumps ideology," said McCrum, the Economist Intelligence Unit analyst. "The economy is therefore key to stability. Yemeni tribes would much rather access public services than AQAP cash and the uncertainty that comes with it.

"Yemen is not a failed state yet. It can be rescued."

Yemen's crises are so overwhelming that any salvage effort could take decades -- a serious test of donors' staying power.

Gregory Johnsen, a Princeton University scholar, said outside powers had accurately analysed Yemen's problems in the past, but never dealt with them except on a rhetorical level.

"There has been no sustainability. And in Yemen the only barometer for success is sustainable and focused attention."

(Editing by Samia Nakhoul)