Telecommunications in Yemen: A Crucial Pillar for National Economy in Need of Development

Sawt Al-Amal (Voice of Hope) – Ahmed Bajoaim

The telecommunications sector is one of the most vital and fundamental industries supporting economic development worldwide. It serves as a backbone for global trade and economy, no longer viewed solely as a service for the population but rather as a critical contributor to the national economy. In many countries, including Yemen, it ranks alongside oil and tourism sectors as a key driver of economic growth. Additionally, it enhances global trade and commercial exchange, while the direct financial income from consumers and internet services becomes a true asset for economic expansion in the country.

Regarding the telecommunications sector in Yemen, there are four mobile phone service providers: Yemen Mobile (government-owned), SabaFon (private), Yemen Oman United telecommunication (YOU, formerly MTN, private) and Y Telecom (private). These companies play a vital role in Yemen’s development across various domains, including economy, information technology, and services.

To understand the roles played by the telecommunications sector in Yemen in boosting economic development, we need to focus on the importance of communications according to studies by economists. Additionally, we should explore how this sector contributes to the public treasury.

Importance of the Telecommunications Sector

The telecommunications sector in Yemen is of great economic importance in the country, as it contributes to supporting global trade and commerce by facilitating communication and interaction between companies and consumers. It also enhances opportunities for e-commerce, thereby increasing the volume of global trade and commerce. Additionally, the telecommunications sector provides direct and indirect employment opportunities through telecommunications companies and associated firms, such as information technology companies.

The importance of the telecommunications sector also lies in enhancing financial inclusion by expanding the scope of financial services, such as providing mobile payment services and electronic banking, also supporting development in various sectors, such as education, health, agriculture, and improving the quality of services provided in these sectors.

Replenishing the Public Treasury

A report from the International Growth Centre (IGC), a development center based in the UK, indicated that the telecommunications sector in Yemen is one of the most important fundamental pillars of the national economy. The sector’s average contribution to the gross domestic product (GDP) between 2015 and 2018 was 7%, in addition to providing a large number of jobs, both directly and indirectly, which improves the public treasury of the finances.

According to the report titled “Reforming the Telecommunications Sector in Yemen” issued in August 2023, the telecommunications sector in Yemen has significant economic importance. However, it differs from regional and global countries in terms of quality and financial costs, which are considered to be high. Furthermore, the internet service speed, which is the major source for replenishing the public treasury from the telecommunications sector, is the worst in the world. The cost of mobile internet amounts to 10% of the individual’s monthly income, far exceeding the United Nations’ target of 2% of the monthly income. This is according to the report.      

The World Bank mentioned in a report titled “Yemen Economic Monitor Highlights Ongoing Challenges, Renewed Hope for a Better Future,” issued in October 2022, that Yemen achieved an economic growth of about 1.5% during this year, unlike the years 2020 and 2021, which witnessed an economic recession in the country.

The UN report confirmed that this improvement in growth was due to non-oil sectors, with the telecommunications sector being the most prominent. However, the report also stated that this growth may decline in the coming years due to several factors, including a decrease in customs revenues, the collapse of the local currency, and consumer price inflation.

In a statistic mentioned by the head of the Department of Financial and Banking Sciences at Hadhramout University and economic expert, Dr. Mohammed Al-Kasadi, the financial revenues of the telecommunications sector in 2021 reached 190 billion Yemeni Rials (the old currency used in Sana’a), while the revenues in 2022 amounted to 220 billion Yemeni rials, an increase of 30 billion rials from the previous year. This indicates that the telecommunications sector is experiencing continuous growth and recovery, unlike other vital sectors that have been affected by the conflict between the warring parties, such as the oil sector, which is the primary pillar on which Yemen’s economy relies.

Al-Kasadi also explained that the tax revenue from telecommunications that entered the state treasury in Sana’a during 2022 was approximately 44 billion Yemeni rials, confirming that the telecommunications sector in the same year represents approximately 10% of the country’s gross domestic product. This demonstrates that telecommunications will contribute significant amounts to the public treasury if the Yemeni government undertakes comprehensive reforms in the sector and improves its services, thereby enhancing the future of the Yemeni national economy, similar to other countries in the region and the world that primarily rely on developing the telecommunications and information sector and adhering to modern standards as a fundamental source for the national economy.

In this regard, Dr. Wathiq Ka’waila, the head of the Information Systems Department at Hadhramout University, explained the importance of the telecommunications sector as the lifeline in most countries around the world, including Yemen, and its continued contribution to the public treasury with financial revenues, especially in the current circumstances where some vital sectors such as tourism and oil have been affected. It is expected that there will be an increased reliance on telecommunications and the internet in the future, leading to an increase in the financial resources of the sector and consequently, its contribution to improving the national economy.

The telecommunications sector has become one of the few sectors that are still active in the midst of the political situation and armed conflict, contributing to compensating for the cessation of other sectors.

In this context, Ka’waila adds to Sawt Al-Amal newspaper that the telecommunications sector, which is considered the third pillar of the national economy, after the oil and tourism sectors, is still operating effectively due to the unstable conditions. This contributes to strengthening the public treasury despite the conflict conditions. Telecommunications companies, especially private ones, work to enhance the public treasury by paying taxes, zakat, and fees. Additionally, the telecommunications sector helps in providing job opportunities and reducing unemployment, which is a significant contribution to achieving economic growth.

Hisham Bayashout, the Financial Management Director at the Public Telecommunications Corporation in Hadhramout Governorate, emphasized the importance of the telecommunications sector to the national economy. Even if its financial returns do not reach the level of other sectors such as oil, gas, agriculture, fisheries, and livestock, telecommunications services are of very high importance to the national economy, in addition to their good returns. The returns of the telecommunications sector are sustainable and not affected by external factors such as conflict and COVID-19, unlike some other sectors. Furthermore, the telecommunications sector is considered the nerve center of official or private economic sectors and institutions, as it enables them to carry out their activities and transfer data between them.

Bayashout added that the importance of the telecommunications sector is not limited to contributing to the state’s public treasury but extends to various aspects of economic and social life. The telecommunications sector is essential for vital sectors such as banks, exchange companies, commercial and oil companies. It is also relied upon by all service institutions, hospitals, educational institutions, universities, various state institutions, diplomatic and international missions. There is hardly an institution, company, or government entity that does not use telecommunications services, which in turn contribute significant revenues to the national economy and the public treasury. This has helped alleviate the impact of the economic contraction that Yemen has been experiencing in recent years due to conflict and political infighting, thus easing the crisis for the citizens.

The Role of Telecommunications Institutions in Economic Development

Economic expert Dr. Mohammed Al-Kasadi pointed out that the role played by telecommunications institutions in contributing to economic development is significant and important. At present, no other sector can operate without the telecommunications and information technology sector. Therefore, it cannot be dispensed with in any way, especially in light of the technological revolution that the world is experiencing in various fields and sectors. The telecommunications sector has become an important part of public life. With the significant demand for it, it can play a prominent role in the economic development of the country, even amidst the contraction experienced by other sectors.

Al-Kasadi also noted that the number of subscribers in Yemen Mobile exceeded 10 million by the end of 2022. Additionally, the company launched a new digital category starting with the number 87 to keep up with the high demand for services, in addition to a large number of subscribers in other companies.

He added that there are about 13 million subscribers to internet service, and also by the end of the same year, the number of subscribers to social media sites exceeded 3.5 million subscribers. The digital literacy factor in Yemen has played the most significant role in the low subscriber rate. Otherwise, it would have been possible for the revenues in the sector to far exceed the current numbers, with a clear and effective impact on the country’s economic development. However, it is expected that in the coming years, we will witness an increase in the number of subscribers due to the importance of the service and its integration in almost all sectors.

Dr. Wathiq Ka’awilah explained that the telecommunications sector plays an important role in economic development, especially in light of the economic downturn that Yemen has experienced over the past two decades. However, it cannot be relied upon as a primary economic driver, especially with the decline of other sectors. The telecommunications sector in Yemen still suffers from service fragility compared to neighboring countries, and it is difficult to rely on it to promote economic development as desired, especially with the significant setback that the Yemeni economy is experiencing due to the conflict. Yemen lacks technological investments and innovation in the telecommunications sector.

Dr. Wathiq continued to explain that despite the ongoing conflict and its consequences, the telecommunications sector still provides many direct and indirect jobs, creating economic development at the individual and household levels. Additionally, internet service contributes significantly to creating opportunities for youth and enables the establishment of numerous small and medium-sized businesses, reducing the economic gap resulting from the continuation of conflicts in many Yemeni provinces and their negative impact on the Yemeni people economically and socially. Furthermore, the telecommunications sector and internet services have helped open up broader and more comprehensive prospects for other sectors to expand their projects, despite limited resources. This is considered one of the important roles that telecommunications play in economic development.

Prosperity and Financial Sustainability

In this context, Hisham Bayashout pointed out that the importance of telecommunications services and their impact on the national economy became clear and significant at the beginning of the year 2022, when telecommunication services were interrupted for four days due to the disruption of the international internet gateway in the city of Hodeidah in the west of the country. This led to a complete paralysis in various institutions, companies, and government entities, leaving Yemen in almost complete isolation from the world. He emphasized that the telecommunications sector is not only an economic sector that supports the public treasury but is involved in all aspects of life and cannot be dispensed with in society.

The Director of the Financial Management Department at the General Telecommunications Corporation in Hadhramout, Bayashout, also highlighted the importance of continuing to work together to provide high-quality telecommunications services available in various regions of the republic to ensure the continuity of economic and service institutions in providing their services and activities to the community inside and outside the country. This contributes to the financial returns of these institutions, which in turn contribute to the national economy and increase the country’s gross domestic product. It can be confirmed that the General Telecommunications Corporation plays a significant role, whether directly or indirectly, in economic development and contributes to its advancement towards prosperity and financial sustainability.

It is concluded that when there is cooperation from everyone to achieve comprehensive development in the telecommunications sector, enhance infrastructure, provide advanced services, expand communication networks to cover all Yemeni territories, and improve technological investments and innovation in the sector, we will achieve comprehensive and sustainable economic development for the country. This will lead to increased contributions to the public budget, create job opportunities to help reduce unemployment and poverty levels, promote digital literacy, and build a more sustainable economy.