For many centuries, trade was the major source of wealth for the states that occupied the southern corner of the Arabian Peninsula. Trade diminished in the 16th century, when the Portuguese set out to control seaborne commerce with the East, turning the Red Sea region, and especially Yemen, into an economic backwater. The only world commodity left to Yemen was the coffee trade, a monopoly that continued for several centuries. The construction of the Suez Canal (completed in 1869) revitalized the Red Sea route between Asia and Europe, proving prescient the British decision to take Aden in 1839. Aden’s deepwater berths and sophisticated and extensive port facilities, which the British constructed over the years, made it one of the world’s preeminent ports.

Still, trade remained quite modest until the economic boom of the 1970s and ’80s; at the height of this boom, the value of Yemeni exports (primarily coffee, cotton goods, and hides and skins) amounted to only a minute fraction of imports, which comprised foodstuffs of all types, manufactured goods (consumer as well as industrial), machinery, transportation equipment, chemicals, and petroleum products—the basic goods demanded by a population formerly isolated from the modern consumer economy. The ratio of exports to imports began to shift dramatically with the start of the export of oil in the late 1980s. With the exception of oil exports, however, Yemen conducts all but an infinitesimal portion of its export trade with its regional neighbours.

Yemen’s biggest trade partners are China and Saudi Arabia. Turkey is another major source of imports. Other major destinations of Yemen’s exports are Thailand, Malaysia, the United Arab Emirates, and Oman. Yemen imports grains, food products, chemicals, and machinery. The dominant export product is crude oil, but it also exports gold and food items to its neighbours.

Services

Within the service sector, public administration is one of the largest employers. Overall, the service sector employs about one-fourth of the population and accounts for about two-fifths of the gross domestic product (GDP). Tourism accounts for a relatively small portion of the GDP; despite Yemen’s rich natural and cultural heritage and government efforts to encourage tourism, the infrastructural underdevelopment and political instability have made many visitors wary of travel to the country.

Labour and taxation

Although the government acknowledges the right of workers to organize, union membership in Yemen is minimal. All unions are federated within an umbrella labour organization, the General Federation of Trade Unions of Yemen. Collective bargaining is limited, and work stoppages and strikes are permitted only with government approval. More than half of Yemen’s workforce is engaged in agricultural labour. Unemployment frequently exceeds 30 percent. Child labour is common, particularly in agriculture, and laws limiting the work hours of children under age 15 are seldom enforced. As is common in Muslim countries, the standard workweek is Saturday through Wednesday.

The country derives most of its income from tax revenue, of which taxes derived from the oil industry are the most significant. There is a personal income tax, and income derived from tariffs and other taxation has traditionally been a major source of the state’s non-petroleum-based income. The Islamic tithe (zakāt) is administered by the state (though calculated by the individual); the proceeds are intended for the relief of the poor. Before 2000 the undemarcated frontier with Saudi Arabia, as well as the fluid political situation along those portions of the frontier that were demarcated (e.g., near Najrān, Saudi Arabia), made smuggling—and thus the loss of much-needed import duties—a chronic problem for revenue collectors.

Transportation and telecommunications

Until the 1960s there were virtually no all-weather roads anywhere in Yemen except in the city of Aden. In the last years of the imamate, the first of these roads were built in the north as part of foreign-aid packages by China, the United States, and the Soviet Union. These first roads—i.e., the one from Hodeidah to Sanaa and the one from Mocha (Al-Mukhā) to Sanaa via Taʿizz—represented major feats of engineering. They cut the transportation time between the cities involved from days to hours and set off an explosion of intrastate traffic and trade. Since then, many of the formerly rudimentary roads in the north and south have been paved, and demands for similar improvements have been raised by numerous small towns and villages. Although all the major towns and cities are now served by all-weather roads, there are thousands of miles of tracks that are passable only by all-terrain vehicles; built at an accelerated rate since the mid-1970s, these tracks have provided an outlet for locally produced goods and easier access to consumer products. The former capital cities of Aden and Sanaa remain the transportation hubs of the south and north, respectively, and travel between most of the lesser towns and cities is not possible except through these centres.

The 1970s and ’80s saw the development of a public transportation system based on buses and shared taxis. Beginning in the late 20th century, the distribution of goods has been handled primarily by modern trucks, some of immense size; these trucks are often overloaded, and the accident rate on Yemeni roads is disproportionately high.

Until the early 1960s, about three-fourths of North Yemen’s very modest international trade passed through Aden. Following the revolution of 1962, however, the new government redirected trade through the Red Sea port of Hodeidah, which was expanded and modernized with major assistance from the Soviet Union. The ports of Aden and Hodeidah now handle nearly all of Yemen’s sea traffic. Although Hodeidah’s port is well-equipped, it has experienced periods of serious congestion. Aden’s extensive facilities were underutilized during the socialist period. With unification and the major upgrading of port and manufacturing facilities that began in the late 20th century (including the inauguration of an industrial free zone in 1991 and the opening of a container port in 1999), Aden—which has good road connections to Taʿizz, Ibb, and beyond—will have the ability to handle most of the country’s international trade. Yemen’s other ports, most notably Mocha and Al-Mukallā, used chiefly by small craft and for coastal traffic and, in the case of Mocha, for smuggling, began plans for revival in the late 20th century. While Mocha canceled most of its development plans after Yemen’s unification, in the early 21st century Al-Mukallā was included in a development program designed to expand the infrastructure of three of Yemen’s port cities.

Prior to unification, the state-owned airlines of the two Yemens provided each country with its chief transport link to the outside world for passengers, mail, and light freight. Both airlines, but especially the one in the south, greatly facilitated internal travel and transport between the cities and major towns of Yemen. The two airlines were finally merged nearly a decade after unification. Today, Yemenia (Yemen Airways) operates regular service to a large number of countries in the Red Sea region and to most other Arab states, as well as to a growing number of European transportation hubs. Major airports are at Aden, Sanaa, and Hodeidah. There are a number of other smaller airports and airfields located in other cities.

There are relatively few main phone lines in Yemen, and, like many other less-developed countries, Yemen is experiencing a boom in cellular and wireless phone service, with such service being provided by several private companies. The number of televisions and radios per capita is quite high. Television and radio stations are located in the larger cities, and more-affluent Yemenis have access to satellite feeds from other Arab countries and elsewhere. Internet service is sparse, and few people own computers.