North Yemen

The average North Yemeni citizen is a back-mountain farmer who spends much of his day behind a camel or donkey pushing a simple wooden plow through rocky soil.

He most likely can't read or write, earns less than $800 a year, and couldn't care less that his war-ridden country is located at what Western political analysts call ''the strategic back door to oil-rich Saudi Arabia.''

Nonetheless, the perception that the regular tribal feuds and border skirmishes in North Yemen are crucial to the stability of the Arabian Peninsula has helped bring a flood of development funds into the country during the past five years. And that has contributed more to the development of roads, hospitals , and schools in cities, towns, and back-mountain regions than this country could ever afford on its own.

Now, with the Yemenis trying to pick themselves up from a Dec. 13 earthquake and subsequent tremors that reports say killed more than 3,000, left an estimated 400,000 homeless, and turned the economy upside down, North Yemen is more dependent than ever on outside sources of financial assistance. But even before the earthquake North Yemeni officials were becoming increasingly concerned about their ability to attract the foreign aid they need.

Ironically, Yemen has in the past five years benefited financially from its instability. But the country's existence on the brink of armed conflict has been a double-edged sword.

On the one hand, it has helped make it imperative for the neighboring Saudis to invest in and contribute economic aid to the country to help counter the influence and subversion of Marxist-backed guerrillas. On the other, the constant threat of open warfare and the regular flare-ups of fighting between a variety of combatants throughout the country have discouraged private investment by Yemenis and others - and thus helped keep North Yemen backward, isolated, and heavily dependent on foreign sources of funds for economic development.

The current five-year development plan is based on the projection that officials will be able to attract enough grants and soft loans from foreign sources - particularly Saudi Arabia - to fund 48 percent of their $7 billion development plan.

Officials are seeing that goal grow increasingly elusive as the Gulf oil producers shift their attention and development funds toward the Gulf war and besieged Iraq. The Gulf producers also have rising financial commitments to Lebanon as well as to the scattered Palestine Liberation Organization. In addition, Arab economic aid, in general, may become increasingly scarce as oil revenues fall as a result of the prolonged glut of oil on the international oil market.

Some observers in Sana also fear that the Army's successful push against National Democratic Front guerrilla strongholds in the spring and summer of 1982 might make it less critical for the Saudis to maintain their estimated $400 million in annual aid to the North Yemen government.

''Development aid has not been officially reduced, but certain commitments have been delayed,'' says Prime Minister Abdul Karim al-Iryani. He notes that, in particular, a $100 million annual appropriation pledged by the oil-producing states during the 1980 Arab economic summit in Amman, Jordan, had not yet been received.

''We made our plan at a time when we were more optimistic,'' the prime minister said.

Though the widespread destruction from the December earthquake attracted large amounts of relief assistance and aid, development funds will have to be shifted from planned projects simply to rebuild what was destroyed during the earthquake. Thus the tremor represented a significant setback to the government's long-term goal of weaning the country from its dependence on foreign aid.

Observers here see this as a central issue in the future development of North Yemen. The basic problem is how to educate and convince the Yemenis to save and invest in their own country rather than spending their money on nonessential imports.

In the past five years Yemeni bank accounts have swelled with petro-dollars earned by Yemenis working as construction workers and in manual labor jobs in the Arab oil-producing states. There are an estimated 1 million Yemenis working in the Gulf - primarily in Saudi Arabia. They send home approximately $1 billion a year in remittances.

This has helped fuel a boom in the Yemeni housing market as well as a rapid increase in imports - particularly of foods and manufactured goods. Though the Yemenis returning from the Gulf have become sophisticated enough consumers to buy items such as Toyotas, radios, and canned peas, the government is worried that they are squandering their hard-earned income on nonproductive imported consumer goods. With imports totaling $2 billion a year, government officials would prefer to see most of those funds channeled into savings and domestic investment.

The large volume of imports reflects a Yemeni desire to attain items that only recently became available. In the past the country was cut off from the outside world. ''People would live in mountain villages and stay there all their lives. Now they have television,'' a diplomat says.

Prior to an Egyptian-backed coup in 1962, North Yemen was a backward, feudal state of warring tribes and thus had little contact with the outside world. Diplomats in Sana are fond of noting that the 1962 coup marked the country's emergence from the Middle Ages. In addition, the coup, which deposed the last of a long line of Muslim imams, led to eight years of civil war. The fighting further delayed the development of basic infrastructure such as roads, electricity, water, schools, and hospitals.

''The problem in Yemen has been that it was deprived of so much until 1962 - and even until 1972 - that everybody is trying to get what they can,'' says a Western observer. He adds, ''Sooner or later they'll realize that if they can't pay for it, they can't get it.''

The government is considering issuing government-backed bonds and imposing import restrictions to encourage more moderate spending and more savings.

Government officials are wary of imposing widespread import restrictions because of the likelihood that such a move would result in more smuggling. The government has taken limited steps to halt the widespread smuggling of goods from Saudi Arabia. Nonetheless, officials recognize that the introduction of cheap, subsidized foods and products from the Saudi market gives their economy a boost.

Smuggling reduces potential government revenues by avoiding customs duties, which are the government's largest source of domestic revenues.

Analysts say the government must move toward establishing a more comprehensive tax system to boost revenues. Such a move is recognized as being politically difficult and unpopular throughout much of the country, and virtually impossible in the northern regions, which are still ruled by autonomous tribal leaders.

Nonetheless, even before the earthquake, the economy was not in good shape. North Yemen has had current account deficits since 1978 and has come to rely on the Saudis and other foreign sources for budget relief. In 1981, the current account deficit exceeded $500 million. It is expected to rise to $870 million by 1986, according to the World Bank.

Some observers say that, with the low level of exports, the expected squeeze on economic aid, and an eventual squeeze on remittances from Yemenis working in the Gulf, North Yemen is facing some lean years. One analyst says: ''It's a very simple economy. They can run back to more primitive things. It's not going to make the economy collapse but it will mean that the consumer boom will be squeezed down. . . . The credit won't be there, the money won't be there.''

The government is counting on agricultural and industrial projects aimed at replacing imports to help reduce its chronic balance-of-payments deficits (expected to approach $350 million in 1982). Government officials remain optimistic that oil will be discovered in the Marib region, though none has been so far. In addition, there are no immediate prospects to help boost exports, but in the long run the government is planning to sell fresh vegetables and possibly coffee to its desert neighbors.

The more immediate goal in replacing food imports, according to Minister of Agriculture Ahmed al-Hamdani, is to increase local production through more efficient use of water, fertilizers, equipment, and land. ''We can grow almost everything we import,'' Mr. Hamdani told the Monitor. ''We can also manufacture and process some of the things that we now import such as tomato paste and canned tomatoes.''

He adds, ''If we stopped buying (imports) totally - and we can - that would easily give us a savings of 2 billion riyals [$440 million]. And I don't think we would make our people suffer in any way or form.''

But because of the current state of agriculture in North Yemen such efforts are a long way off. Approximately 8 percent of North Yemen's 75,000 square miles is cultivable. Much of it consists of narrow, terraced fields carved into rocky mountains. Such fields make large-scale mechanization impossible. This further complicates government efforts to raise the efficiency of farmers above subsistence levels.

In 1981 more than 70 percent of Yemeni workers were farmers, contributing 28 percent of that year's gross domestic product.

One significant hindrance to greater and more efficient food production and to development in general in Yemen is the seemingly universal chewing of the leaves of the khat tree (catha edulis). Khat chewing has become an institution in Yemen, with an estimated 90 percent of the population regularly buying the fresh leaves and chewing them. (A bunch about the size of a bouquet of a dozen roses would be a typical afternoon's supply for one person.)

Almost every business and office in the country closes from 2 p.m. to 6 p.m. - the time being set aside to relax with friends, talk, and chew khat. Although no one is quite sure what the leaves are or do, khat has been described as a mild narcotic with both sedative and stimulant effects. The Yemenis say it is not addictive and that it is a good means of relaxing and socializing.

Observers say, however, that Yemenis in general spend at least as much money on khat as they do on food. Some Yemenis spend $20 to $50 a day to buy the leaves. Such high prices earn farmers between $500 to $1,000 a day, which has encouraged them to plant more khat trees - sometimes at the expense of other crops such as coffee.

Other articles in this series appeared Jan. 12 and 13