SANAA, Feb 22 (Reuters) - Yemen's painful struggle to build a modern state may be overwhelmed by rampant population growth, dwindling resources, corruption and internal conflicts.
"I don't believe there is another nation in the world...that is this close to a population-cum-resources catastrophe," said Ramon Scoble, a water expert from New Zealand working in Yemen.
The Middle East's poorest country wins few headlines, except when tourists are abducted by unruly tribesmen or killed by al Qaeda-inspired militants, but any slide into chaos here would pose huge risks for next-door Saudi Arabia and the wider world.
Yemen perches on the Red Sea and the Gulf of Aden, vital oil transport routes from the Gulf to Europe. Thousands of refugees from Somalia and Ethiopia wash up on its shores every year.
The ancestral home of Osama bin Laden is the focus of intense U.S. concern in Washington's "war on terrorism".
President Ali Abdullah Saleh, in power for 30 years, has faced increasing challenges to his authority since he was re-elected for another seven-year term in September 2006.
His military has yet to crush a four-year-old "Houthi" revolt by Zaidi Shi'ite tribes in the northwest region of Saada, although another fragile truce took hold earlier this month.
In the south, anger over perceived northern depredations is imperiling Saleh's main achievement -- the 1990 accord that united traditionalist north Yemen and the Marxist south.
Many tribal regions still escape or challenge government control in a land reputed to have more guns than people.
Looming over these conflicts is an economic crisis already fostering unrest and threatening to propel Yemen backwards.
"Unless there is an economic reprieve for Yemen during the next three years or so, the challenge is much bigger than the Houthis or so-called (southern) secessionists," Abdul-Karim al-Iryani, a veteran politician and Saleh adviser, told Reuters.
"Yemen has very meagre resources, a very high population growth rate of over three percent, and difficult terrain so that development requires huge resources. That's our hard luck."
The population has doubled to 22 million since Saleh took power in the former north Yemen in 1978. It could gallop to 40 million in the next 20 years unless aggressively reined in.
"The catastrophe is looming faster than anyone can imagine," said Scoble, consultant to Germany's GTZ development agency. He said Yemen had enough rainfall for only about 2 million people.
According to the government, 19 of Yemen's 21 aquifers are in negative balance, with more water extracted than replenished. Most goes to irrigate qat, a mild narcotic widely used in Yemen.
Oil, the economy's mainstay, is depleting fast despite exploration to reverse the trend. Output is officially projected at 300,000 barrels per day this year, from 320,000 in 2007.
The decline makes it harder for the government to sustain costly fuel subsidies that soak up $1 billion a year, or about a third of oil revenue. But their removal could spark violent unrest among Yemenis already hard hit by rising food prices.
Insecurity has affected international companies developing the oil and gas sectors, while attacks on foreigners may prove fatal for the nascent tourism industry, Western diplomats say.
"Yemen is positioning itself for irrelevance because of its inability to get a grip on the security situation," a European diplomat said. "It's the worst I've seen it in three years."
Foreign donors, aware of Yemen's strategic and security importance, have pumped billions of development dollars into the country in recent decades, despite qualms about corruption.
"Corruption affects every other goal that we or the Yemenis have, whether democracy building or security," outgoing U.S. deputy ambassador Nabeel Khoury told the Yemen Observer last year, singling out the military as one of the worst offenders.
Yemen joined Washington's fight against al Qaeda after the Sept. 11 attacks on U.S. cities, but prison escapes by militants have upset the Americans, who are also dubious about Sanaa's policy of reintegrating Yemenis who once fought in Afghanistan.
Iryani described the programme as "very useful", but said al Qaeda had been able to recruit replacements and acknowledged that the United States was dissatisfied with the outcome.
"The reason is that some of those who committed not to commit any terrorist acts in Yemen sneaked over to Iraq, so the Americans said 'you didn't really brainwash them, you only got their commitment not to attack in Yemen'," Iryani said.
The government tends to minimise the impact of southern unrest, terrorism and tribal insecurity, citing the potential of tourism and foreign investment to turn Yemen's fortunes around.
Such views are echoed by Faris Sanabani, editor of the Yemen Today monthly, who argued that regional prosperity was at stake.
"Yemen shouldn't be a failing state and it won't be," he said. "If Yemen goes down, Saudi Arabia will go down with it."
Editing by Samia Nakhoul
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