My good friend and colleague Naif was furiously sketching on a flipchart. His demeanor, usually calm and scholarly, was intense. Naif was sharing with us the main outcomes of the National Dialogue Conference, the highpoint of Yemen’s state restructuring process which brought together the most disparate groups of Yemenis, from Houthis in the Northwest and Hadramis in the East to the Hirak in the South. They sat together and, through dialogue, agreed on a series of guiding principles aimed at guaranteeing fundamental rights and freedoms, reducing the centralization of power, eliminating corruption, and empowering women and youth. They also managed to endorse, albeit with much contention, a six-region, three-tier federal state structure to address demands for more regional autonomy and to give voice to local aspirations. All of these are to be reflected in a new constitution, which is expected to steer the course of the new state. Yet, many challenges remain for the Yemenis.
One big question looming before the new state is how benefits from natural resources will be shared in a federal Yemen. The sparsely populated Hadramout has oil and gas, Azal has mineral resources, Aden, Janad and Tahama have fisheries and marine resources, while water is scarce across the country.
Yemen has only about 125 cubic meters per person whereas the global standards are about 1000 cubic meters per person. Moreover, political and hydrological boundaries rarely, if ever, coincide. Therefore, the Constitution would have to consider arrangements for the regulation and management of inter-regional rivers and modalities for allocation of water shares. In some countries, water resources are a federal function exclusively or based on ‘residuality’ (whereby the center plays the major role). In others, water is a concurrent function among multiple tiers, and intergovernmental forums are used to negotiate water agreements. Still others have independent water commissions. Getting water to cities and villages as well as ensuring smart use of water for agriculture will also be important. For long, remote Yemeni communities have relied on themselves to manage water. Future co-management arrangements will have to connect communities with local governments to ensure sustainability in resource allocation and use, as well as accountability in service delivery.
Extractive industries present a special challenge due to their volatile pricing, exhaustibility, and high technological and economic complexity, among other things. Often they are concentrated in sparsely populated regions and under the jurisdiction of a small number of subnational units. Revenues from these resources are also tricky. There are various tax revenues, oil profits and royalties, but there are also often negative environmental and social externalities that accompany hydrocarbon extraction. How will Yemen manage its vital oil and gas rents? Which level of government will be responsible for collecting and managing the revenues; will they be shared equally across different localities, or will producing regions be specially compensated; what will ensure transparency and accountability in revenue sharing arrangements; and how can the benefits of oil and gas be used for public good? Yemen’s dilemma is not unique. Countries as diverse as Brazil, the United Arab Emirates, Russia, Nigeria and Indonesia have dealt with this question. Many of them, especially federal countries, involve some degree of concurrency among different tiers and distinct institutional and monitoring arrangements.
Assigning expenditure responsibilities and apportioning revenues will be another big concern. Some sectors like education provoke strong emotions while others like transport are driven more by technical, economic and other practical considerations. The bigger challenge is making sure that the new service delivery arrangements are effective and that, more broadly, the government is representative, responsive and accountable to citizens. However, this is not easy in a country where central government has controlled the bulk of public expenditures and revenues, but has failed in providing even basic services in the past.
Given its history, can Yemen’s decentralized model simply stop at the level of governorates, which have failed to deliver to citizens in the past? Should it not recognize and strengthen district governments? Local governments are important for many reasons: firstly, they are the most proximate and accountable level of government to citizens; secondly, they have greater informational advantages on the types and levels of services demanded by their constituents; and finally, they can help build a cadre of grassroots politicians, some of whom then, over time, graduate to higher political offices. Further, in conflict-affected environments, local governments often serve as frontline forums for crisis resilience and dispute resolution, such as in Nepal, Cambodia and recently in Jordan. But then, can Yemen afford four full-fledged tiers of government?
Decentralization means dispatching engineers, doctors and teachers to the remotest corners of the country to deliver services. What will happen to the presently overstaffed central ministries; can the staff be redeployed to underserved subnational governments? In East Asia, for example, the share of employees at the subnational level ranges from 19 percent in Thailand to 90 percent in China. Both Indonesia and Philippines transferred large numbers of central employees to the regions but with largely mixed results. But this is bound to be sensitive in Yemen. Finally, building a capable cadre of subnational staff will take resources, time and long term commitment. Can the fledgling state undertake this?
These challenges and more — worsening political and security environment, severe macro-fiscal constraints, acute fuel shortages, among others — are testing the will of Yemenis. In early June, a small Bank team was invited to share our global experience on the above issues with seventeen Yemenis who are members of the Constitution Drafting Committee. This retreat, organized by the German International Cooperation, was held in Berlin, a city that is no stranger to such watershed moments of history. We experienced firsthand the intense personal and communal struggles that Yemenis face in trying to draft a new constitution for a new state. We shared with them what we knew about fiscal federalism, resource sharing, decentralization and service delivery. But we could not tell them what would be the best for Yemen. That historical responsibility falls on Yemenis alone.
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