AFP - Donors worried about Yemen's worsening economic and security situations sought ways Sunday to speed up the country's use of development funds and to address the looming challenge of its falling oil income.

The two-day Gulf Cooperation Council's closed-door meeting that closed on Sunday focused on why much of some 5.7 billion dollars in pledged international aid remained unused by Yemen, where economic woes and rebellions were strengthening a potent branch of Al-Qaeda, officials said.

They said that donors and Yemeni officials, led by Deputy Prime Minister Abdul Karim al-Arhabi, agreed that donors needed to work together to improve Sanaa's capacity to absorb and use the aid effectively.

"The main problem is capacity," said Abdul Aziz al-Uwaisheg, GCC director general for international economic relations.

"We try to identify the blockages" to proposed development projects, he said.

The meeting came a month after Britain called an urgent meeting of donors in the wake of a December 25 attempt by a Nigerian to blow up an American passenger jet landing in Detroit.

That attack, which US investigators say is linked directly to Yemen-based Al-Qaeda on the Arabian Peninsula (AQAP), awakened the international community to the deteriorating security situation in the Arabian peninsula's poorest country.

The failed attack also followed several other busted plots by AQAP operatives for attacks in Saudi Arabia, including a failed assassination of a top internal security official in August.

The Riyadh meeting involved mostly technical experts comparing their views of why the billions of dollars in aid first pledged at a November 2006 London meeting -- 4.7 billion at first which was later topped up to 5.7 billion -- had not been moving.

At least 3.7 billion dollars of the aid was pledged by the six GCC members, Saudi Arabia, Qatar, Kuwait, Bahrain, Oman and the United Arab Emirates.

The rest was from major donors like the United States, Japan, the European Union and organisations such as the World Bank, the United Nations, and the Islamic Development Bank.

The funds were to be spend or allocated for specific development projects -- from infrastructure to hospitals and schools to training programmes -- by the end of 2010.

But only 58 percent has been allocated or spent on projects, said Uwaisheg.

"The disbursement level at 58 percent caused some concern" among donors, he said.

Although the aid increased, in Yemen's ministries "There was no corresponding increase in ability... to absorb it," he said.

The GCC meeting also took a first look at Yemen's next five-year development plan covering for 2011-2015, Uwaisheg said.

About 70 percent of Yemen's earnings are from oil and gas exports, but a steady decline in production could wipe out that income in eight to ten years, according to economists.

The meeting examined ways the government could balance its income and spending, including eliminating fuel subsidies, long called for by international donors.

A top priority for Sanaa -- getting the labour-dependent GCC countries to allow more Yemeni workers -- was mentioned by Yemen's delegates, but not discussed at the meeting.

Officials said it was an issue for the GCC to consider, but for the labour and immigration ministries of each country.

Meanwhile on Sunday the bilateral Saudi-Yemen Coordination Council agreed on near 2.5 billion riyals (667 million dollars) worth of new Saudi-funded development projects in Yemen, including energy development, roads, sewage, and education.