This article appears in the June 29, 2018 issue of Executive Intelligence Review.
The Miracle of Yemen’s Reconstruction and Connection to the New Silk Road
This is a summary review of the original, 86-page Arabic-language report, Operation Felix: The Miracle of Yemen’s Reconstruction and Connection to the New Silk Road, which was the product of a joint effort by the Schiller Institute, the Yemeni General Investment Authority (YGIA), and Swedhydro Consulting (Sweden). The project was coordinated by the Yemeni New Silk Road Party and its founder, Fouad Al-Ghaffari. The report’s author is Hussein Askary, Southwest Asia Coordinator for the Schiller Institute and a writer for Executive Intelligence Review. The report was released at a seminar in Sana’a on June 6, 2018. The original Arabic version is available to download free of charge at the website of the New Silk Road Party of Yemen.
The reconstruction of Yemen, after the currently ongoing, destructive Anglo-Saudi war of aggression is concluded, will require a miracle. But that is exactly what this report proposes. The time of miracles is upon us. Many miracles have been achieved and many others are underway. A new era in the history of mankind has dawned under the leadership of the BRICS nations (Brazil, Russia, India, China and South Africa), and the launching in 2013 of the Belt and Road Initiative (BRI) by China’s President Xi Jinping. These two developments have opened the gates of history to a new and just world order.
China’s miraculous industrialization process over the past two decades, lifting 700 million of its people out of poverty, is a strong indicator of this new process. The fact that China has offered its technological capabilities, know-how, and financial resources to partners in the developing world to replicate this miracle, is a strong motivation for the Yemeni people and leadership to opt for the highest levels of ambition.
This is the context within which Yemen could rise and achieve its own miracle. As the Yemenis managed to achieve the miracle of resisting the most vicious and powerful military forces, they can—with the same measure of success—achieve the miracle of reconstruction. The reconstruction miracle will naturally be more difficult than the military one, but it will be more joyful, and will bring together all the citizens of Yemen—men and women from all possible parts the country and from all different backgrounds as a unified force for the good of the entire nation.
The reconstruction process will unify the people of Yemen in the exact opposite way as the war of aggression—and those behind it—sought to divide them. It will preserve the dignity and grace of the Yemeni individual and his and her cultural identity with the same force that their enemies used in attempting to destroy that identity through efforts to eliminate its people and destroy their beautiful cultural and architectural heritage.
The Republic of Yemen enjoys a unique geographical position at the intersection of the land-based Economic Belt of the New Silk Road and the Maritime Silk Road—that is, the Belt and Road. Yemen can become the bridge between Asia and Africa, and between the Indian Ocean and the Mediterranean, and thus a key component of this giant development project, while benefitting from it at the same time; in the words of Helga Zepp-LaRouche, “making Yemen a pearl in the necklace of the New Silk Road.”
Yemen played a similar role in ancient history when it mastered the trade routes, called “the incense and gum routes,” and many powerful nations from east and west set sail and drove their camel caravans in its direction, seeking trade and exchange of knowledge. The ancient Greeks and Romans called Yemen “Arabia Felix,” because it was perceived as a prosperous and happy nation. Today, Yemen enjoys great human resources, as most of its population are children and youth under 30 years of age, making it a young society capable of progress and continuity into the future through comprehensive and long-term visions and economic plans.
Yemen also has abundant natural resources and a diverse climate and topography, making it suitable for integrated agro-industrial development. Lacking in Yemen is what American economist Lyndon LaRouche calls “the economic platform” of basic infrastructure, to lift all these resources to higher levels of productivity and bring into being their latent great potential. Such a raised economic platform will allow Yemen and its people to take control of their economy, their resources, and their future.
“Operation Felix” proposes a project for the reconstruction of Yemen on the basis of accumulated knowledge and lessons drawn from successful reconstruction models achieved by other nations in recent history, such as Germany after World War II, or after major economic disasters such as the Great Depression in the United States in the early 1930s, or nations that managed to evolve from poverty into powerful and prosperous industrial ones, like South Korea and most recently China.
From the scientific-economic aspect, the full report relies on the Science of Physical Economics, as defined by LaRouche, and not on the monetary or rentier/physiocratic theories and methods that were imposed between the early 1980s and 2014 and earned Yemen the nickname, “the poorest country in the region.” LaRouche’s “Metrics of Progress” have become a subject of study among certain groups of Yemenis in the past three years.
Our report makes it clear from the outset that the Operation Felix plan is not based on the idea of reconstructing Yemen’s economy to restore it to its previous conditions before the war of aggression was launched in March 2015, nor to its state before the 2011 popular revolt, because that state of economic affairs was a disaster, as explained in detail in Chapter 2. The intention is to provide the “economic platform” for a prosperous and progressing nation, and connect it to the BRI. It also deals with Yemen as a single, unified country, with a centralized government and a unified and integrated plan for the reconstruction of the country as a whole.
When projects everywhere in the country have the same standards and metrics, such as in the transport, power, and communication sectors, from the remotest point in the north to the far south, they will be achieved much faster and at lower cost, in comparison with small projects each carried out locally with different standards. Integration of the reconstruction and development process requires the establishment of a central “reconstruction authority,” functioning under the Ministry of Planning, with branches or offices in every governorate in order to coordinate with the local administrations the planned projects and their priorities. The centralization and unification process is very important in light of attempts, both before the war, and now by the Saudi-led coalition, to divide Yemen into a confederation of six regions, encouraging separatism and tribalism.
Destruction of Economy Before the 2015 War
One important feature of this report is the description of the disastrous policies of the past 30 years, prior to the war, that made Yemen the poorest country in the region. Our reason for reviewing these policies and the conditions they created is to warn policy makers against the pitfalls of the economic and financial methods that have been dominant in the trans-Atlantic power structure and its clients/victims, and the prospect that when peace is achieved, there is a risk that the same economic methods will come back, disguised this time as “reconstruction aid.”
A relevant phenomenon defined here is the “rentier state,” defined by Hossein Mahdavy as a state that relies almost solely on the export of its abundant raw materials in order to import its needs, with little attention paid to investments in improving domestic productive capacities. While Saudi Arabia, the Gulf states, and other OPEC nations are good examples of this, Yemen is an extreme example. In the decades that followed the the Republican revolution of September 1961, but especially under President Ibrahim Al-Hamdi, who launched a major local development process and the five-year plans of development in 1974, until his assassination in 1978 (by Saudi-backed elements), Yemen was on its way to achieving a promising level of modernization and development.
However, these plans slowed down after Al-Hamdi, and when Yemen discovered its crude oil reserves and launched its oil production and export in 1986, the state was suddenly awash with easily earned foreign currency. In 1987, the global crude oil price was in the U.S. $40/barrel range, lower than the very high levels of the early 1980s when the Iran-Iraq war had begun, but that was still a major income volume for a poor country. But when the Asian Crisis of 1997 hit the global economy, the oil price dipped to the range of U.S. $20/barrel. It did not recover until after September 11, 2001 and the invasion of Iraq that followed in 2003, reaching the range of U.S. $100-120/barrel. However, following 2007-2008 financial crisis, the price collapsed again.
This factor made Yemen a hostage to the volatility of global prices and its almost total reliance on exports of oil to finance its needed imports of food and almost every other commodity. Another disaster hit the economy when the production capacity of crude oil from Yemeni wells started to shrink in 2002, as new exploration and production projects were not considered profitable by international oil companies in a stagnant world market. Foreign debt was on the rise and more loans were required to cover the trade and state deficit. In the early 1990s, Yemen had lost its main financial partners: Iraq, now under a criminally harsh UN economic sanctions regime following the 1991 Kuwait war, and the Soviet Union, which disintegrated later that year—a factor which left Yemen on its own to face the combination of aggressive neighbors and the twin vultures of the IMF and World Bank.
The Yemeni government, under President Ali Abdullah Saleh, was already in the clutches of the IMF in 1995, after the destructive civil war of 1994. The Yemeni government started receiving conditional loans from the IMF and World Bank from 1995 on, through the usual “structural adjustment programs,” forcing the state to privatize its corporations, lift all state subsidies for food and basic commodities, fire tens of thousands of state employees, and open its domestic market to competing foreign goods through radical free market policies that killed whatever existed of domestic production. Needless to say, Yemen was no longer allowed to build infrastructure or industries, nor to support agricultural projects, and practically lost its sovereignty over the economy.
The “private sector” was supposed to carry the burden abandoned by the state, but that was impossible in such a poor country. A massive privatization campaign of state-owned enterprises ensued, allowing the corrupt leadership of the country to enrich itself by transfer of ownership of these assets. Despite the dire food situation in the country, especially after the global food price crisis in 2008, Yemen was encouraged to increase exports of cash-generating crops, such as fruits and vegetables, with Saudi Arabia and the Gulf countries being the main market. With no support for, or protection of, domestic cereals production, farmers switched to growing more cash-generating crops, such as fruits and vegetables, but more seriously to the Khat drug, consumption of which exploded in that period and increased even further later, creating additional economic, social and health problems for the society, especially for those in lower-income brackets. The fisheries sector was the only sector that received any significant investments, but that sector was dedicated not to providing food for the Yemeni people but for export markets.
All these factors made Yemen a net importer not only of food (80% of its cereals needs by 2014) and other consumer goods, but also of petroleum products, such as diesel and motor oil, as the state was discouraged from investing in building new refineries and petrochemical industries. Almost no major infrastructure projects were launched, and all the advice and financial support the Yemeni government was given by the IMF, World Bank, and the UN was to concentrate on small projects here and there. Later, the Yemeni government was even forced to hand over control of its newly discovered gas fields in 2007 to foreign developers, among them the French company Total and the United States’ Hunt Oil Company.
The Saudi War: the Planet’s Worst Humanitarian Disaster
Chapter 2:2 details the consequences of the Saudi-coalition’s bombardment campaign since March 2015, which specifically targeted infrastructure, industries, power and water utilities, and even agricultural production. By all legal standards, this bombing campaign qualifies as a war crime. The coalition has also imposed a total land-air-sea blockade on Yemen, preventing food and medicine from flowing into the country, and preventing people in need of emergency medical aid abroad from traveling, through the targeting of airports.
The statistics compiled by the Yemeni Ministry of Human Rights, corroborated by international humanitarian agencies, reveal a horrendous level of destruction and suffering.
By January 2018, there were 22 million Yemenis (70% of the population) who were in need of food, medical aid or shelter. Seven million were in acute need of food aid. 2.9 million children and women were acutely malnourished. Sixteen million lacked clean water and sewerage, leading to the explosion of a cholera epidemic. Seventeen thousand people died out of the 120,000 sick people who needed to travel abroad for emergency medical treatment, but were stranded by the closing of Sana’a’s airport. Civilian victims, as a direct result of military operations, were 17,000 dead, mostly women and children, with an additional 24,513 injured. As for the indirect casualties, it is estimated that 300 civilians have died since March 2015.
Of the infrastructure, almost all power generation utilities have been destroyed. Most oil and gas production is stopped, except for a few fields controlled by the Saudi coalition. Airports, ports, bridges, and roads are being systematically targeted. Even fishermen and their boats have become targets. Many industrial facilities—mining, metal production, food processing, logistics centers, and dairy product plants—have been systematically targeted and destroyed. Even schools, technical education institutions, and universities have been targeted. Hospitals were not spared either.
Financially, the Saudi-controlled government of exiled President Abed-Rabbo Mansour Hadi, decided in September 2016 to move the Central Bank operations from Sana’a to Aden, which is under the coalition’s control. This meant that the bank was no longer able to pay the salaries of millions of state employees in areas not controlled by the coalition, increasing the suffering of millions of families. Furthermore, the Central Bank was not able to facilitate trade transactions with foreign exporters of food, medicines, and other necessary commodities.
Reversing the Policy
1. Financing Reconstruction. As proposed in the full report, the reconstruction and development plan will start with the Acting President in Sana’a making a public statement, even before a ceasefire is reached, that the government of the Republic of Yemen is intending to launch a reconstruction process and a development plan for the nation. He will define the key priority projects and objectives of the plan, starting from the emergency action plan to rebuild the destroyed infrastructure; provide immediately needed food and medical aid; and invite friendly powers to participate in new infrastructure projects, defining the future connection to the BRI. However, he will immediately follow that by announcing, in the same statement, the establishment of a national reconstruction and development bank to finance the process.
For Yemen to be a truly independent and sovereign nation after this war, it will have to have its own credit-generating mechanism. The reconstruction and development process will require the establishment of a national development bank (tentatively called in our report “The Yemeni National Bank for Reconstruction and Development,” or YNBRD) to finance the national projects in infrastructure, agriculture and industry. The YNBRD is to be owned jointly by the state (51% stake) and the citizens and private and financial institutions of Yemen (49% stake). Foreign governments and financial institutions may also subscribe to a limited share of the stocks or bonds of the bank. All grants and financial aid by friendly nations should be converted into deposits in the bank.
The YNBRD will be under the supervision and direction of the Finance Ministry and separate from the Central Bank of Yemen. The details of how credits are generated nationally by the YNBRD are treated thoroughly in Chapter 3:1, which makes reference to similar historical examples and the origin of this “national credit” system, as originating from the ideas of the first U.S. Treasury Secretary Alexander Hamilton in the young Republic of the United States of America.
The other, additional source of financing for reconstruction and development projects, especially ones requiring foreign technologies, machinery and involvement of foreign companies, is through export credit agreements with the nations whose corporations participate in, or export the necessary material for, the development projects.
One very good example from Yemen itself, is the 2013 China-Yemen agreement to finance the Aden Container Terminal Expansion project. That project was planned to be carried out by a Chinese company, being financed through a loan extended by the Chinese Ex-Im Bank to the Yemeni government. However, the project was not carried out because of the ensuing dangerous security situation. The intention was to make the Aden Container Terminal one of the largest ports in the region for transshipment, allowing Triple E-class Maersk super-large container ships to dock at the port. The agreement was signed November 2013, one month after President Xi Jinping announced the concept of the Maritime Silk Road of the 21st Century, which would make Aden and the other Yemeni ports key components of global trade and economic exchange.
The Yemeni General Investment Authority presented to this author a list of projects (included as an appendix to the full report) in infrastructure, industry, agriculture, and fisheries, for which the Yemeni government is willing to cooperate with foreign investors on the basis of Build, Operate, and Transfer (BOT).
2. The Yemeni Development Corridors. The key component in the report’s reconstruction and development plan is the construction of the “Yemeni Development Corridor.” After explaining LaRouche’s concepts of the “Development Corridor” and the “Economic Platform,” this author proposed the construction of the Yemeni Development Corridor with the main “spine” being the Sa’ada-Aden corridor, and the east-west extensions along it being the “limbs” of the national project.
Three factors were considered in defining the routes of the corridors:
(1) The current concentrations of population, agricultural activities, available water resources, and mineral wealth.
(2) The diversification of the demographic distribution and future growth to new areas on the western coast and eastern plateau, with both regions representing an untapped agro-industrial potential, in the mining sector, but most importantly in commercial agricultural activities, especially in the production of cereals to reduce and later eliminate the dependency on imports.
(3) Connecting to the BRI, on the land route to Oman and across the Hormuz Strait to Iran and Asia, and westward through a tunnel/bridge to Djibouti and Africa. The other connection to the BRI is through the main ports of Aden, Al-Hudaidah, and Mokha, where in addition to transshipment and logistics operations, new industrial parks can be built, benefiting from the proximity to international trade routes and the locally abundant human and natural resources.
The report references the tremendous developments taking place around Yemen, due to the BRI and China’s different initiatives, such as the Djibouti-Addis Ababa railway, the Mombasa-Nairobi railway, the Lamu Port-South Sudan-Ethiopia Transport Corridor (LAPSSET), and many more projects that will transform Eastern Africa into one of the fastest growing regions. This is a great advantage for Yemen, which should consider that region as a great market, and also consider itself as a major logistics hub. To the east of Yemen, in Oman, the China-initiated Asian Infrastructure Investment Bank (AIIB) has already financed feasibility studies and preliminary work on a pan-Omani railway network extending from the Hormuz Strait to the border with Yemen, and new ports and industrial parks on the long coast of the Arabian Sea.
One interesting aspect of the developments taking place in Yemen’s neighboring countries, Ethiopia and Oman, is that due to similarities in topographic and demographic characteristics, Yemeni policy makers will have ready examples of similar infrastructure projects, and will be able to examine the advantages, difficulties, technical aspects, and financing.
This author takes one example, comparing the proposed Sa’ada-Aden railway project to the standard-gauge Ethiopian Mekele-Weldiya-Awash railway, which is now under construction. The length of railway (622 km, compared to the proposed Yemeni project of 607 km) and the physical characteristics of the route, are strikingly close. Both will traverse mountainous areas reaching from 800 to 2,300 meters or more above sea level. In the case of the Ethiopian railway, the project required the construction of 31 tunnels with a total length of 20 km, 140 bridges (total length 20 km), and 1300 culverts (total length 40 km). The total cost of the railway is U.S. $4 billion. The Ethiopian state internally financed the first section with U.S. $1.5 billion, and obtained U.S. $2.5 billion provided through export credits from the export-import banks of China and Turkey, and Austria’s and Sweden’s foreign credit facilities.
Operation Felix envisions development projects for power, water, agriculture, and manufactures. Concerning water, we propose a national water management program, to include construction of a large number of medium-size and micro dams for rain harvesting and flood prevention, in addition to power generation. The Yemeni General Investment Authority (YGIA) suggested that U.S. $10 billion is required between 2019 and 2030 for construction of such dams on ten rivers in Yemen. In addition, a national network of water distribution and the regulation of groundwater exploration and utilization must be established. Besides the management of existing sources, new water resources need to be “created” through sea water desalination and climate engineering, such as ionization of the atmosphere to enhance rainfall.
As for power generation, report urges the state to regain control over the natural gas and oil resources, through re-negotiating the previous agreements with foreign companies, allowing the state to prioritize the production of electricity for domestic consumption before exports. In the short and medium term, natural gas, and the large, unutilized coal reserves of the country could be an appropriate response to the lack of power generation necessary for the nation’s growth, as their construction takes less time (18-24 months) and are cost-effective.
However, for increasing and more efficient energy demand in the future, the Yemeni nuclear power program, which was proposed in 2007 but never started, must be relaunched. Nuclear power will not only be a key factor in power generation and desalination of sea water, but also will free the petroleum resources to be used in higher-value-chain products such as fertilizers, chemicals, and plastics, creating many industries in the country and employing tens of thousands of youth.
The industrial sector needs to be protected by abolishing the previous free market policies imposed by the IMF and World Bank. Through tariffs and customs, the state can protect the nascent industries that will be started by young Yemeni entrepreneurs to produce the needs of the domestic markets and for the global market, especially for the growing African markets. The development of infrastructure in Yemen, in addition to providing abundant power and water, will attract foreign investments in the Yemeni industrial sector.
In the agricultural sector, a new strategy for food security must be shaped, reversing the previous practices advised by the IMF/World Bank, UN and FAO that focused on small-holder subsistence farming. The new strategy envisions a dramatic vertical as well as horizontal expansion. The vertical implies supporting the Yemeni farmers through introduction of new irrigation methods, development of new varieties of seeds, and applying fertilizers and machinery to farming. The horizontal expansion implies opening new land areas for large-scale commercial farming, especially of cereals, to secure the food supply of the nation and stop the bleeding of resources through reliance on imports. The state must once again assume its responsibility as the guardian of the food security and independence of the people of Yemen.
The Basis for a Lasting Peace
This author proposes that the government in Sana’a adopt the plan presented in the report as a key component in any peace and reconciliation talks between the different Yemeni belligerent parties, and that it be agreed upon in advance of any such talks. It should also be presented to each of the member states of the United Nations General Assembly, as a way of encouraging them to pressure the regional and international powers to bring about an immediate cease fire and push the national reconciliation and peace talks forward.
This proposal has the power and spirit, as has been expressed by most Yemenis who have reviewed it, to mobilize the various groups in the nation around a single, unified concept oriented towards a common goal in the future: to secure for their posterity well-being and prosperity. At the same time, it is a means of motivating the international community to consider the absurdity of continuing this war, and to accept the truth that the people controlling the government in Sana’a are not mere militias with power ambitions, but are statesmen with vision and knowledge. The responsibility to stop this genocidal war is upon every individual and every government in the world today. The vision for launching a genuine reconstruction and development plan in Yemen—one that is in harmony with the new paradigm of cooperation in the world—has been defined.
Table of Contents
Chapter 1: The International Context
The rise of the BRICS system and the collapse of the trans-Atlantic system
What is the BRICS?
What is the Belt and Road Initiative?
Chapter 2: The National Economic Context
Before the war of aggression: The problem of the rentier economy
During the aggression: The destruction of the basic infrastructure and creation of the humanitarian crisis
Chapter 3: Reconstruction
How reconstruction of a destroyed economy can be financed
The Hamiltonian national credit system
“The Yemeni Bank of Reconstruction and Development”: A proposal
Proposed projects for Yemen
The concept of “the development corridor”
The “Yemeni Development Corridors”
Transportation: The Yemeni main railway (Sa’ada-Aden) and extensions
Agriculture and fisheries
Manufactures with appendix (projects proposed by the Yemeni General Investment Authority)
Chapter 4: Levels of the Operation
First level: Emergency plan for rehabilitation of destroyed infrastructure, emergency aid to the population and youth employment, using Franklin D. Roosevelt’s Civilian Conservation Corps as a model
Second level: Negotiations with friendly powers on building a new economic platform
Third level: Connection to the New Silk Road: Yemen as the Belt and Road bridge between Asia and Africa
[fn_1]. Hossein Mahdavy, “The Pattern and Problems of Economic Development in Rentier States: The Case of Iran,” in Studies in the Economic History of the Middle East, ed. M.A. Cook (Oxford: Oxford University Press, 1970). [fn_1 back to text]
‘Sana’a Declaration’ Adopts Schiller Institute Plan
In a powerful demonstration of the resilience and steadfastness of the Yemeni people in the face of the current Anglo-Saudi war of aggression, and the eagerness of the people and officials in Yemen to join the New Paradigm of international relations, a meeting was held June 6—at the headquarters of the Yemeni General Investment Authority (YGIA) in the capital of Yemen, Sana’a—to issue the “Sana’a Declaration,” which declaration endorsed the 86-page Schiller Institute report, Operation Felix: Yemen’s Reconstruction and Connection to the New Silk Road, authored by Hussein Askary, Southwest Asia Coordinator for the Schiller Institute.
YGIA acting director and deputy director, Engineer Khaled Sharafeddin, opened the meeting by thanking Askary and Mrs. Helga Zepp-LaRouche, President of the Schiller Institute. He expressed his full support for the proposals made in the report, and estimated that building the new economic platform, as proposed in the report, will require about U.S. $210 billion. Engineer Sharafeddin stated that the YGIA will work on two tracks with the government in Sana’a, (1) to translate the report into an action plan for the government, and (2) to thoroughly study all the infrastructure and financial proposals made in the report, in order to launch the construction process as soon as the war of aggression is ended. This work will begin immediately after the end of the Ramadan period of fasting.
Askary, the report’s author, recommended that the Sana’a government present the report, to the United Nations and other international powers, to be included in peace negotiations as a key item to be agreed upon by all parties, in advance of political discussions.
The report, in Arabic, has already been sent to the leading figures in the Sana’a government and to key institutions internationally, including the Chinese and Russian embassies in Yemen. It is available to download free of charge from the website of the New Silk Road Party of Yemen, chaired by Fouad Al-Ghaffari.