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SANAA, Feb 2 (Reuters) - Yemeni President Ali Abdullah Saleh, eyeing protests that ousted Tunisia's leader and threaten to topple the Egyptian president, has again pledged not to try to extend his presidency in 2013 or hand over to his son.
"No extension, no inheritance, no resetting the clock," Saleh said on Wednesday, speaking a day before a planned "Day of Rage" rally in Sanaa against his almost 33 years in power.
Yemen's main Islamist opposition party said Thursday's protests would go ahead anyway.
Saleh, whose term expires in 2013, has made similar promises in the past, notably in 2005 when he said he would not be a candidate in the 2006 election, only to change his mind.
His ruling party has responded to sporadic anti-government protests by calling for dialogue with the opposition, with which it has sparred over presidential term limits and other political reforms demanded ahead of parliamentary elections due in April.
Saleh had already offered some concessions on term limits and pledged to raise salaries of civil servants and military personnel by around $47 a month, no small move in a state where about 40 percent of the population lives on less than $2 a day.
Yemen, a strategic U.S. ally against a resurgent al Qaeda arm, is trying to cement a peace deal with northern rebels and quell a southern separatist revolt, all in the face of crushing poverty, dwindling oil revenue and an acute water shortage.
Global security concerns focused on Yemen, a neighbour of top oil exporter Saudi Arabia, after the Yemen-based al Qaeda in the Arabian Peninsula (AQAP) tried to bomb a U.S.-bound airliner in December 2009 and despatched parcel bombs by airfreight to Chicago that were intercepted in October 2010.
Worries about instability and corruption have deterred significant foreign investment in Yemen beyond the oil industry, limiting economic growth and worsening unemployment.
The parcel bomb plot sealed AQAP's reputation as one of the most ambitious arms of al Qaeda's globally scattered affiliates.
In another unsuccessful hit, an al Qaeda suicide bomber who had spent time in Yemen tried to kill Prince Mohammed bin Nayef, Saudi Arabia's anti-terror chief in August 2009.
AQAP has also been more active locally, clashing repeatedly with security forces and attacking foreign and government targets in Yemen in response to a U.S.-backed crackdown.
Washington has stepped up counter-terrorism aid to Yemeni forces and a U.S. diplomatic cable leaked in November said the U.S. military was launching air strikes on al Qaeda targets in Yemen, but had agreed with the government to keep this secret.
"We'll continue saying the bombs are ours, not yours," Saleh was quoted as saying in the cable.
But Al Qaeda's actions over the past year have raised doubts about whether the campaign against AQAP was working.
Yemen has combated al Qaeda on and off since before the Sept. 11, 2001 attacks on the United States, often in concert with Washington, but its approach to dealing with militants has been criticised in the West as half-hearted and ineffective.
- More attacks on international and domestic targets.
- Public backlash against U.S. role in fighting al Qaeda.
Growing violence in south Yemen in recent months, from separatist ambushes to armed clashes with security forces, has raised fears of a sustained insurgency.
North and south formally united in 1990 but some in the south, home to many of Yemen's oil facilities, say northerners have used unification to seize resources and monopolise jobs.
Many southerners believe they were better off before unity, when South Yemen had a welfare state established with Soviet aid. They say discrimination became worse after a brief 1994 civil war, sparked by a southern secession attempt.
Sanaa has offered dialogue with the opposition, including southerners, but arrests and military deployments in the south have heightened hostility toward the north.
- Spiralling violence as a growing number of southerners, angered by government security clampdown, take up arms.
- Poverty and unemployment may fuel any insurgency.
Yemen is working to cement a shaky truce struck with northern Shi'ite rebels a year ago to halt a civil war that has raged on and off since 2004. Saudi Arabia intervened militarily in 2009 after rebels seized some Saudi land.
The rebels, who belong to the minority Zaydi sect of Shi'ite Islam and who are known as Houthis after their leaders' clan, complain of religious and socio-economic discrimination.
The ceasefire, along with prisoner releases by both sides, has halted major combat, but sporadic violence persists.
In August, the government and the Houthis signed a Qatari-mediated deal to start a dialogue to end the conflict. But previous truces in a war that has displaced 350,000 people have not endured, and no lasting peace is in sight.
- Sporadic violence may deteriorate to full-blown conflict.
- Rebels regroup and restart their campaign.
Almost a third of Yemen's inhabitants suffer chronic hunger, jobs are scarce, corruption is rife, and oil and water resources are drying up, further straining the economy.
The cash-strapped government is almost powerless to meet the needs of its expanding population and there are fears that Yemen may tip into chaos if it cannot pay public sector wages.
A recent tumble in the Yemeni rial further added to the country's economic woes, forcing the central bank to inject some $850 million, around 15 percent of its reserves, into the market in 2010 to support the currency.
Yemen finds it hard to absorb external development aid. Only a tenth of the $4.7 billion pledged by donors in 2006 has been disbursed due mainly to administrative hurdles, officials say.
As part of badly needed economic reforms, Yemen has begun reducing fuel subsidies that burden state finances, but is moving slowly to avoid riots provoked by previous price rises.
Yemen also faces a water crisis, deemed among the worst in the world and aggravated by excessive irrigation by farmers growing qat, a mild narcotic leaf chewed by most Yemenis and whose consumption weighs on productivity.
- Any signs the central government may run out of cash. * For political risks to watch in other countries, please click on [ID:nEMEARISK]