The Houthi group has recently intensified its harsh treatment of the Yemeni private sector, employing various methods and tactics. This escalation raises concerns about the ongoing systematic campaigns against this sector, which could severely impact the national economy.

The pace of Houthi aggression against the private sector has notably accelerated since the reopening of the Hodeidah port to container ships, allowing the entry of various goods and commodities. Despite earlier assurances to merchants about facilitating imports through Hodeidah, the group has raised duties, taxes, and customs fees by an alarming 140%.

Indeed, the Houthi group's breach of its prior commitments to the private sector is hardly surprising. Over the past years, commercial activities within the areas under the group's control have been subjected to a widespread onslaught characterised by a continuous series of practices and violations. These actions generally result in the displacement of the existing merchant class and the emergence of a new, parasitic elite.

Several Aspects:

The Houthi group lacks a cohesive organisational structure that unites its members and employs various tactics to strengthen this structure. This includes systematically targeting national capital, subjecting it to extortion, imposing royalties, and attempting to establish partnerships forcibly. It is also inclined, to varying degrees, towards supplanting existing forces with alternatives across different market segments.

In line with the group's efforts to build its economic framework, it has intensified its ongoing assault on the pillars and components of the national economy. This strategy aims to dismantle the political economy of the former state institutions, characterised as integral components of the republican system. It's part of the group's broader objective to undermine the entire state apparatus established during the inception of the republican system. The group is racing against time to develop its political economy, enabling it to assert control over public life.

In pursuit of this agenda, the group has embraced what it terms "brokerage," "mercenary," and "profiteering" economies. These encompass a range of mechanisms, from issuing licenses to participating in negotiations and conducting tenders within areas under its control. Simultaneously, it has sought to curb profits through tactics akin to financial intimidation. Moreover, the group has actively worked to dominate the real estate market while imposing specific patterns of land ownership in urban areas and their surrounding suburbs. These actions are facilitated through an organised mechanism for restructuring property ownership.

Early Phases of Targeting:

The initial phase of targeting commenced soon after the group gained control of the capital, Sanaa. It involved the activation of various tax brackets and compelled numerous institutions to pay retrospective taxes in a series of instalments. These tax measures extended even to rural areas, creating a one-sided financial cycle, or more accurately, a half-cycle. The financial direction of funds shifted from citizens towards institutions affiliated with the group.

Consequently, this led to a rise in the costs of locally manufactured goods due to the accumulation of tax burdens, increased fuel prices, the energy market slipping out of government control, heightened transportation expenses, and a deepening crisis of currency shortage in circulation. This currency shortage resulted from an inability to compensate for its loss and the substitution of non-national currencies in market transactions.

Moreover, the group imposed royalties and financial levies on the commercial sector, aiming to secure financial gains at the expense of the stability of the national capital. Their justification often revolved around questioning merchants' loyalty to the group and accusing them of disloyalty and external dependence. The group consistently applies this systematic method with leaders of the armed factions and social tribal leaders, all to bolster its position and influence.

The group proceeded through a series of well-organized steps to gain control over the private sector. This began with attempts to subjugate the sector by imposing levies and financial royalties. Over time, it evolved into a strategy of acquisition and substitution, representing its efforts to reshape the national economy by monopolising all productive and operational sectors within the private domain.

Prominent Methods Employed by the Houthi Group to Constrict Economic Activities and Dominate the Private Sector:

1-     One of the most conspicuous strategies used by the Houthi group involves the imposition of a convoluted tax structure comprising over 20 brackets. As noted by some experts, this approach has drawn criticism for its apparent inconsistency and redundancy.

2-     The group has introduced additional tax brackets and royalties to bolster its financial resources, thereby enhancing its financial capabilities.

3-     The Houthi group has capitalised on pending commercial and real estate disputes within the judicial system. It leverages these cases as tools for extortion, subjugation, and the imposition of its dominance.

4-     The group utilises the judicial system to assert control over select commercial companies and private properties. This legitimises the confiscation of the rights of others and the plundering of assets.

5-     The Houthi group controls the humanitarian activities of international organisations operating in the relief sector. It has established a specialised body to monitor these activities and imposes numerous restrictions on delivering humanitarian aid to those in need within its territories. Moreover, it obligates supporting parties to allocate a specific percentage of aid.

6-     The group has actively undermined the formal economy by introducing new networks of interests and influential entities to dominate the public sphere of economic activity. This began with the monopolisation of fuel trade in areas under its control, giving rise to an informal economy that established parallel economic structures to finance its war efforts.

7-     The Houthi group perpetuates a monetary divide by allowing the national currency to be exchanged at two different values. Additionally, it has systematically disrupted the banking system, which serves as a vital lifeline for the national economy and the private sector.

8-     The group has legitimised a law that outlaws interest in all financial transactions within banks, ostensibly as a measure to combat usurious practices. However, this has significantly impacted private sector activities, giving the Houthi group the authority to seize all financial deposits held by merchants and business people in banks.

9-     The Houthi group has introduced a "receiver" system aimed at manipulating property rights related to commercial properties and companies. This has also legitimised organised money laundering operations and the systematic, widespread plundering of the wealth and property of Yemeni citizens.

10-  The group has forcibly entered the Chamber of Commerce and Industry in the Capital Secretariat, appointing an alternative leadership in contravention of established laws and regulations.

Diverse Strategies:

The Houthi group employs an array of strategies to target the private sector, with the most prominent among them being:

1- Legitimizing Taxation: The backdrop of war has given the Houthi group a pretext to legitimise various economic measures, even as it continued introducing additional constraints that curtailed private sector activity and national capital. These measures have been rationalised as necessary for customs and tax collection and, at other times, vital for stabilising food supplies in the markets.

In May 2023, the Houthi group approved economic measures, including establishing price lists for various commodities, closing several commercial enterprises, and amendments to laws governing income taxes, sales tax, and customs. Moreover, it restricted the entry of multiple commercial trucks into areas under its control. Concurrently, efforts were made to replace private-sector merchants with new ones. This shift seems indicative of an attempt to establish an economy precisely aligned with the group's interests while also constraining the activities of its competitors in the market, ultimately enabling the group to dominate buying and selling operations.

The group further enacted amendments to various laws, such as Law No. (19) of 2001 AD concerning the general sales tax and its subsequent amendments, Law No. (17) of 2010 AD regarding income taxes and its amendments, and Customs Law No. (14) of 1990 AD and its amendments. These amendments appear geared towards ousting many established commercial enterprises and trading houses in favour of individuals loyal to the group. This move strengthens the group's capacity to reshape the economic landscape in alignment with its objectives.

2- Establishing Unauthorized Ports: The group has set up illicit customs checkpoints at various entry points to Yemeni governorates to secure additional customs and tax revenues. This activity has gained momentum recently, particularly following the easing of restrictions at the port of Hodeidah, which now permits container ships to reach areas under Houthi control.

Among the most conspicuous unauthorised customs centres established by the group are Afar and Dhi Na'im in Al-Bayda, Al-Maytam in Ibb, Al-Hazm in Al-Jawf Governorate, Harf Sufyan in Amran, Saqam and Al-Rahda in Taiz, Jabal Ra’s in Al-Hudaydah, Shawaba in Arhab, and the Nihm port, located east of Sana'a.

Numerous testimonies from traders and importers affirm that these customs centres, positioned far from sea and land borders, subject commercial shipments to additional customs duties despite having met all customary requirements and procedures during their entry into the country. This results in significant financial losses for the retail sector, causing the prices of goods to soar dramatically, far surpassing the actual cost of imported commodities.

Undoubtedly, these unauthorised levies and fees have placed a substantial burden on the private sector. Moreover, some commercial shipments endure prolonged detention periods at these newly established customs checkpoints within the heart of the country. This exacerbates financial losses for these traders and exposes the goods to potential damage due to extended wait times in the scorching sun, as attested by numerous importers.

3- Sustaining Economic Fragmentation: The Houthi group enforces a policy requiring merchants and importers to make cash payments, covering 100% of the imposed taxes and customs duties. This exerts substantial pressure on them, particularly given the existing monetary and banking crisis characterised by a shortage of cash liquidity. The burdens placed on the organised private sector are further compounded by the prevalence of smuggling, which undermines the principles of fair competition. These practices have increased production costs, price inflation, and elevated inflation rates within the economy. Consequently, the private sector has been forced to contract, resulting in reduced working hours, diminished production, and layoffs. This decline has significantly impacted the total output of the private sector, causing it to fall below pre-2014 levels.

4- Monopolization of Economic Power Centres: These measures are part of a well-structured plan to establish new centres of financial influence and monopolise key power sources. The Houthi group recognises that controlling the country's private sector and commercial and industrial activities is essential for achieving its goals. While it has aggressively imposed widespread taxes on the commercial sector since the outset of the war, depleting it significantly, this approach serves to erode the capital of these institutions when measured against the standard values of other currencies.

Moreover, these actions establish a financial half-cycle that primarily benefits the group. This cycle operates either through state institutions under its control or via its members and their associates. This system effectively siphons the economic energies of the country, consuming all profits and growth within this economic sector. The group has not hesitated to employ various justifications to justify its financial plunder and infringements on the financial rights of citizens, exploiting the tense wartime atmosphere. It has granted itself the authority to seize employees' salaries and disrupt Chapter One of the budget of any government or authority globally, which typically covers salaries and expenditures on essential public services. Consequently, these practices have led to the personal interests of its members growing, national capital facing mounting losses, and a decline in the standard of living among the population due to elevated inflation levels and reduced purchasing power.

Enormous Economic Losses:

Simultaneously, the Houthi group's relentless series of attacks on free commercial activities within areas under its control since September 21, 2014, has resulted in a severe decline in the gross product of the private sector. This has led to the bankruptcy of numerous small and medium-sized enterprises and the termination of employment for hundreds of thousands of private sector workers.

The disruption of production processes and disputes instigated by the Houthi group within certain companies and major commercial conglomerates have played a pivotal role in diminishing overall performance and reducing production volumes. Consequently, the gross domestic product of the national economy has experienced a significant downturn.

Official statistics issued by the General Federation of Chambers of Commerce in Yemen indicate a substantial decrease in the cumulative value of the current gross domestic product of the industrial sector in 2020, estimated at a staggering 52% compared to its size in 2012. Consequently, the industrial sector in Yemen suffered a significant loss of 73% of its output on average from 2015 to 2020 as a direct result of the protracted war and the accompanying challenges. Notably, the employment rate in the public industrial sector reached only around 12% of its production capacity on average. In comparison, the private sector maintained an employment rate of approximately 64% of its production capacity.

These continued measures to curtail private sector activities raise grave concerns within the commercial sector about the Yemeni economy descending into further crises. This adversely affects the overall investment and business environment, prompting national capital to seek refuge elsewhere through emigration and migration. Additionally, it contributes to a decline in the private sector's role in the importation process and a decrease in its commercial activities. This, in turn, will likely result in crises and supply bottlenecks in the markets.

Yemen finds itself at the forefront of countries where food imports are expected to decrease, primarily due to global price hikes and increased insurance costs for sea freight containers, which are anticipated to set record highs in the international import bill.

Hidden Agendas:

These practices undertaken by the Houthi group, which systematically undermine the private sector, lay bare the group's persistent endeavours to establish an economic landscape within its controlled territories, isolated from the liberated governorates. Additionally, these practices perpetuate economic and financial divisions.

The group seems committed to waging an economic war against the legitimate government, effectively besieging it by controlling resources and revenues. Furthermore, it targets commercial and financial activities within the liberated governorates.

Hidden objectives and agendas emerge from the group's actions toward the private sector. Foremost among these is its ambition to dominate the import market within its controlled areas and augment its revenue streams by bolstering shipping activities at the port of Hodeidah.

These objectives also encompass the creation of a new class of merchants and businessmen affiliated with the group. The aim is to control commercial activities at the expense of sidelining and displacing the longstanding private sector and established commercial entities.

The group's actions further contribute to the erosion of national capital. It does so by increasing sales taxes, income taxes, and customs duties, thereby imposing additional financial burdens on merchants and importers. This worsens the humanitarian plight of citizens, making it easier for the group to implement its agenda of restructuring the commercial landscape in the country. This transformation has become evident through the emergence of a new influential and wealthy class of individuals and businessmen who have profited from the spoils of war in recent years, amassing significant wealth from looted public and private funds.

Over more than eight years, this relentless assault has involved destroying the state's public and mixed economic institutions, imposing restrictions on the private sector, and the seizure and confiscation of salaries belonging to nearly a million employees in the civil, military, and public sectors. This has instilled confidence within the group, leading it to target organisations such as the Solidarity, Coordination, and Defence Foundation, which represents the national capital, and the Federation of Chambers of Commerce. It has occupied these institutions and altered their leadership in a pre-emptive move to thwart any potential protests, including strikes and civil disobedience, that might arise within these entities linked to the national capital.

In conclusion, the Houthi group demonstrates a keen awareness of the vulnerability of various union structures, whether within the government or the private sector. This becomes particularly evident in the education sector, where the group established an alternative entity to replace pre-existing unions. This development occurred within a year after the Houthi occupation of the capital.

For instance, the Teachers’ Club was established as a substitute for the Union of Teachers, Educational, and Pedagogical Professions, along with the Union of Educational Professions. Additionally, two unions representing the intellectual elite, namely the Union of Faculty Members at Sana'a University and the Yemeni Writers Union, have ceased to exist. An exception to this trend is the Journalists’ Syndicate, whose leaders departed from the capital, Sana’a. It remains the sole voice in union activities within the broader right-wing landscape.

Undoubtedly, the oppression and dominance exercised by any group or authority tend to escalate when organised political resistance loses the bonds of collective solidarity that serve to restrain and counter such oppression.

Therefore, the private sector finds itself compelled to activate mechanisms of collective solidarity in response to the systematic measures employed by the Houthi group to seize control of it and erase its presence in the national economy. The group intends to make way for new parasitic classes while aiming to usurp the market share traditionally held by the established private sector while positioning itself as the rightful successor.

The Houthi group diligently employs all available means of intimidation to facilitate the replacement and control of the commercial and industrial landscape to establish power and influence, with money serving as the primary lever in its pursuit. The group firmly believes that control over financial resources will enable it to perpetuate its authority and dominate the public sphere within the country.