Historical background

North Yemen became independent of the Ottoman Empire in 1918. The British, who had set up a protectorate area around the southern port of Aden in the 19th century, withdrew in 1967 from what became South Yemen. Three years later, the southern government adopted a Marxist orientation. The massive exodus of hundreds of thousands of Yemenis from the south to the north contributed to two decades of hostility between the states. The two countries were formally unified as the Republic of Yemen in 1990. A southern secessionist movement in 1994 was quickly subdued. In 2000, Saudi Arabia and Yemen agreed to a delimitation of their border.

Economic overview

Yemen, one of the poorest countries in the Arab world, reported average annual growth in the range of 3-4% from 2000 through 2007. In 2008, growth declined slightly as the price of oil dropped and the slowing global economy reduced demand for oil. Yemen's economic fortunes depend mostly on declining oil resources, but the country is trying to diversify its earnings. In 2006, Yemen began an economic reform program designed to bolster non-oil sectors of the economy and foreign investment. As a result of the program, international donors pledged about $5 billion for development projects. A liquefied natural gas facility is scheduled to open in 2009. Yemen has limited exposure to the international financial system and no capital markets, however, the global financial crisis probably will reduce international aid in 2009.