mbassador Charles F. DUNBAR; Embassy at Dhahr Himyar Zone,
Sheraton Hotel District, Sanaa (mailing address is P. O. Box 22347 Sanaa,
Republic of Yemen or Sanaa--Department of State, Washington, D. C.
20521-6330); telephone [967] (2) 238-842 through 238-852

_#_Flag: three equal horizontal bands of red (top), white, and black;
similar to the flag of Syria which has two green stars and of
Iraq which has three green stars (plus an Arabic inscription) in a
horizontal line centered in the white band; also similar to the flag of
Egypt which has a symbolic eagle centered in the white band

_*_Economy
_#_Overview: Whereas the northern city Sanaa is the political
capital of a united Yemen, the southern city Aden, with its refinery
and port facilities, is the economic and commercial capital. Future
economic development depends heavily on Western-assisted development
of promising oil resources. South Yemen's willingness to merge stemmed
partly from the steady decline in Soviet economic support.

North--The low level of domestic industry and agriculture have made
northern Yemen dependent on imports for virtually all of its essential
needs. Large trade deficits have been made up for by remittances from
Yemenis working abroad and foreign aid. Once self-sufficient in food
production, northern Yemen has been a major importer. Land once used for
export crops--cotton, fruit, and vegetables--has been turned over to
growing qat, a mildly narcotic shrub chewed by Yemenis that has no
significant export market. Oil export revenues started flowing in late
1987 and boosted 1988 earnings by about $800 million.

South--This has been one of the poorest Arab countries, with a per
capita GNP of about $500. A shortage of natural resources, a widely
dispersed population, and an arid climate have made economic development
difficult. The economy has grown at an average annual rate of only 2-3%
since the mid-1970s. The economy had been organized along socialist
lines, dominated by the public sector. Economic growth has been
constrained by a lack of incentives, partly stemming from centralized
control over production decisions, investment allocation, and import
choices.

_#_GDP: $5.3 billion, per capita $545; real growth rate NA%
(1990 est.)

_#_Inflation rate (consumer prices):

North--16.9% (1988);

South--0% (1989)

_#_Unemployment rate:

North--13% (1986);

South--NA%

_#_Budget:

North--revenues $1.4 billion; expenditur