BMI's Executive Summary

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Yemen faces a complex and dangerous mix of security problems. Its fiercely independent tribes have long been considered an important breeding ground for Al Qaeda Islamic extremists, and North Yemen is the ancestral homeland of Osama Bin Laden. A separate Shiite rebellion has dominated the northwest with alleged support from Iran – a ceasefire was implemented in mid-2007 but remains rather fragile. Separately, there are still tensions between North and South that can be traced back to the brief civil war of 1994. Tribesmen also seek to resolve a variety of local disputes over water, roads and electricity supplies among other things by kidnapping foreign tourists and negotiating for the their release. In addition there is a very large supply of weaponry in the country and scant regard for central authority. And while all this could be described as a security nightmare, the country in other respects has certain strengths. Since 9/11, Yemen has become a close ally in the US government's 'war on terror'. And although subject to authoritarian rule, in some respects Yemen offers greater political freedoms than many other Arab governments. A key figure in Yemen's balancing act is of course President Ali Abdullah Saleh. In 2007 his grip on power seemed as tight as ever. Calls for his departure were limited – much of the public fears that the country could revert into disorder should President Saleh step down.

Yemen now enjoys relatively stable relations with its neighbours following a decade of tensions over several bilateral territorial disputes, primarily with Saudi Arabia, and Riyadh is now supportive of the presidency in Sana'a. However, some security challenges are presented by internal instability in the postunification period. The military remains a favoured recipient of government investment, and procurements for all three branches of the armed forces continue despite overwhelming budget constraints and a lack of trained personnel to use the equipment. It is likely that Yemen will maintain its military strength and seek to further modernise specific sectors of its military to respond to new or existing terrorist threats. Yemen is completely dependent upon foreign procurements, as it enjoys no indigenous defence industry. Yemen's total dependence on the procurement of foreign produced arms forces the government to depend on a brisk arms trade, although not so brisk as some of its neighbours. Historically, Yemen has acquired Russian and ex-Soviet bloc states for military equipment, but recent signs suggest that Sana'a is seeking to diversify. The September 2004 lifting of a US arms embargo on Yemen has allowed entry for US firms into the Yemeni market. However, given budgetary restrictions, procurements have not yet taken place.

Sana'a is stabile for the time being but is under immense financial restraints. Oil production only began in Yemen in the 1990s and, while average incomes rose as a result, the industry only employs a small percentage of the workforce and has not succeeded in generating substantial wealth. However, Yemen maintains a high level of military expenditure relative to GDP. In 2005, Yemen spent approximately 7.5% of its GDP on the military. This trend is unlikely to change.

Contents

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Chapter 1 - Executive Summary

SWOT Analysis

Yemen Political Overview SWOT

Yemen Security SWOT

Yemen Defence Industry SWOT

Chapter 2 - Political Overview

General Overview

Governance

Domestic Political Outlook

September 20 Elections

Short-Term Continuity – Long-Term Instability

Fiscal Reforms Will Continue To Stall

Succession Questions Persist

External Political Outlook

Uneasy Alliance

Washington Will Tolerate Hamas Talks

Dilemma Over US Relations

Al-Zindani Case Will Be Flashpoint

Al-Qaeda Jailbreak Adds To Embarrassment

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Yemen Regional Security Ratings

Table: State Terrorism Vulnerability Index

Regional Security: The Middle East and North Africa

Inter-State Conflicts

Internal Conflicts

Yemen Security Risk Ratings

Yemen Conflict Risk

Yemen Terrorism Risk

Yemen Physical Safety Risk

Chapter 4 - Security Risk Profile

Internal Security Situation

Table: Yemeni Insurgent Groups

Historical Background

Unification And Civil War

Local Islamist Extremism

Zaidi-Muslim Cleric Hussein Badruddin al-Houthi

Clashes With The 'Believing Youth'

Heavy Fighting

Prisoner Release

Domestic Security Concerns Persist

External Security Situation

Regional Security Dynamics

Relations With Saudi Arabia

Pre-War Iraq

Links To Global Terror

USS Cole

Prison Break

US

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Army

Navy

Air Force

International Deployments

Weapons of Mass Destruction

Market Structure

Arms Trade Overview

Procurement Trends & Development

Chapter 6 - Industry Forecast Scenario

Table: Yemen Defence Sector Size Of Armed Forces

Immediate Opportunities

Economy

Key Risks To BMI’s Forecast Scenario

Chapter 7 - Macroeconomic Forecast

Oil And Water Pose Key Risks

Risks To Core Scenario

Yemen: Macroeconomic Data And Forecasts

Chapter 8 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 9 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for MEA Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's Middle East & Africa Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: