Observed by: Mr. Alaa Isam
Eying protests that swept Tunisia's leader from power and threaten to topple Egypt's president, Saleh also vowed not to pass on the reins of government to his son. He also appealed to the opposition to call off protests as a large rally loomed.
"I present these concessions in the interests of the country. The interests of the country come before our personal interests," Saleh told his parliament, Shoura Council and members of the military.
"No extension, no inheritance, no resetting the clock," he said, making reference to ruling party proposals on term limits that had been seen as designed to enable him to run again.
The move was Saleh's boldest gambit yet to stave off anti-government turmoil spreading in the Arab world. Analysts said it was an attempt to avert a showdown with the opposition until after regional unrest cools.
Saleh's remarks came a day before a planned large opposition rally, dubbed a "Day of Rage," seen as a barometer of the size and strength of the Yemeni people's will to follow Egyptians and Tunisians in demanding a change of government.
"I call on the opposition to freeze all planned protests, rallies and sit-ins," Saleh said. "I call on the opposition after this initiative to come and form a national unity government in spite of the ruling party majority. We will not allow chaos. We will not allow destruction."
Yemen, already slipping towards becoming a failed state, is trying to fight a resurgent al Qaeda branch, cement peace with Shi'ite rebels in the north and quell separatism in the south, all in the face of crushing poverty. One third of Yemenis suffer from chronic hunger.
RALLY TO GO ON
The biggest opposition party welcomed the initiative but said Thursday's rally in the capital Sanaa would go ahead as planned.
"We consider this initiative positive and we await the next concrete steps. As for our plan for a rally tomorrow, the plan stands and it will be organised and orderly," said Mohammed al-Saadi, undersecretary of the Islamist Islah (reform) party.
"This is a peaceful struggle through which the people can make their voices heard and express their aspirations."
Saleh had already offered lesser concessions on presidential term limits and pledged to raise civil servants' and military salaries by around $47 a month, no small move in a country where about 40 percent of the population lives on less than $2 a day.
However, the pledges on Wednesday went much further.
Saleh promised direct election of provincial governors which would give Yemenis more control over local governance.
He also promised to re-open voter registration for elections due in April in an apparent response to opposition complaints that around 1.5 million Yemenis were unable to sign up.
Such a move would require a delay in the parliamentary elections, giving Saleh time to bring the opposition on board for the vote by persuading them it would be fair.
The president also put on hold all proposed constitutional changes, including on presidential term limits, pending negotiations with the opposition.
Yemen's current rules would require Saleh to step down when his term ends in 2013.
But members of his ruling party had riled the opposition with proposals for constitutional amendments to either lift that limit or impose term limits but allow Saleh to run again.
The opposition tried to rally against lifting term limits in December, but failed to bring large numbers to the street. Last week, however, a protest drew around 16,000 people to demand a change of government. Some called for Saleh to leave.
(Additional reporting by Mohammed Ghobari in Sanaa, Erika Solomon and Mahmoud Habboush in Dubai; Writing by Cynthia Johnston; Editing by Matthew Jones and Paul Taylor)