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Yemen economy bullish, but where's the money?

Growth of 8 percent is expected, thanks to the energy sector, but half of Yemenis still live on $2 a day.

“There is input to the government in the form of increased revenue, but what you get as output is not always what you expected,” he said.

To create sustainable economic benefits for average Yemenis, the government must improve the country’s investment environment, increase the capacity of the government to deliver services, eliminate corruption and implement reforms, Yaqoub said. And most of all, the government must establish legitimacy in the eyes of the people — a task that will take time and require the government to make good on its promises.

He used the example of government diesel and gasoline subsidies. The unsustainable subsidies currently eat up almost 30 percent of the total annual budget, but a cut in subsidies in 2005 caused the price of diesel to double, and led to riots across the country that killed more than 30 people. So even if it is better economic policy to cut subsidies, Yaqoub said, the government did not have enough credibility to pull it off, “They say ‘It’s your problem. Why should we pay for it?’”

At the beginning of February, the government again cut some subsidies — jacking up diesel and gas prices by a much smaller 8 percent — a gradual increase that has taxi drivers grumbling, but not rioting.

“There needs to be a lot of transparency,” said Abdo Seif, a program adviser to the United Nations Development Fund. “If you are doing reform by lifting subsidies, for example, and nothing is happening down the line, [the citizens] don’t buy in.”

But even skeptics in Yemen see opportunity in 2010, with the revenue from natural gas and the increased interest from the international community in the stability of the Yemeni economy.

“The government has the buy-in of citizens, the buy-in of the international community and strong regional support,” Seif said. “It’s a golden opportunity to implement reforms for once and forever.”

The trick will be ensuring that al-Baradi, the shopkeeper, sees the results.

Reporting for this story was supported by the Pulitzer Center on Crisis Reporting.