YEMEN: WTO ACCESSION UPDATE

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002250

SIPDIS

STATE PASS TO USTR - BUNTIN

E.O. 12958: DECL: 09/07/2013
TAGS: ETRD ECON EINV YM ECON COM
SUBJECT: YEMEN: WTO ACCESSION UPDATE

Classified By: CDA A.G. Misenheimer for reasons 1.5 (b) and (d).


1. (u) Summary: Minister of Industry and Trade Khaled Rajeh
Sheikh will lead the Yemeni delegation to the WTO ministerial
in Cancun. Yemen is moving steadily forward on WTO accession
and expects to accede in 3-5 years. The European Commission
(EC) is launching a five-year, seven million Euro project to
provide technical assistance to Yemen's accession. While the
ROYG is pushing accession, the business community is voicing
strong concerns over Yemen's preparedness. End summary.

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Hoping for the Best Deal in Cancun
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2. (u) Minister of Industry and Trade Khaled Rajeh Sheikh and
Advisor to the Minister and Chief of WTO Coordination and
Communication Nagib Hamim will travel to Cancun for the WTO
Ministerial, September 10-14. Hamim told Pol/Econ Chief and
Pol/Econoff on August 25 that the ROYG was examining the
accession process of Nepal and Cambodia, in order to obtain a
more favorable accession agreement for Yemen. Hamim said
that the ROYG is also monitoring the outcome of the
discussion on agricultural subsidies. Commenting that Yemen
is a net food importer, Hamim said he supports a gradual
reduction in agricultural subsidies.

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WTO Accession Still 3-5 Years Out
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3. (u) Deputy Minister Iqbal Bahder told participants at the
June 23-25 Ministry of Industry and Trade sponsored National
Integrated Framework (IF) Workshop that he expects Yemen's
WTO accession to take 3-5 years. The purpose of the workshop
was to review the results of the Diagnostic Trade and
Integration Studies on Yemen completed in 2002. Government
and non-government representatives determined an action plan
to enhance and strengthen the ROYG economy. Several
academics and Islah-oriented businessmen criticized the IF
study for neglecting the ROYG role in job creation. The
completed action plan focuses on infrastructure development,
building roads, job-training, and improving the quality of
exports.


4. (u) The Dutch, who are the ROYG's partner in the IF
process, circulated the action plan to the donor community
and will hold meetings throughout the Fall to coordinate
assistance plans. At the same time, ROYG officials will
combine the results of the IF study with the World Bank's
Poverty Reduction Strategy into a single reform strategy.


5. (u) According to Hamim, Yemen is finalizing its answers to
the 167 questions submitted from the U.S., EC and Australia
on Yemen's Memorandum of Foreign Trade Regime. Hamim expects
the questions to be answered by the end of the year, which
will enable Yemen to have its working party meeting early in

2004. On a recent visit to Geneva, Hamim obtained approval
for two outreach seminars funded by Geneva to discuss WTO
accession with academics and parliamentarians, which will be
held this fall.

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EC to Fund Five Year Accession Assistance Program
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6. (c) Head of the Yemen office of the European Commission
Reiner Schierhorst (protect) described to Pol/Econ Chief and
Pol/Econoff the EC's five-year 7 million Euro program to
assist Yemen in its accession process on August 27. The EC
will fund a WTO advisor at the Ministry of Industry and Trade
to oversee its program, which includes assistance for
accession, institutional strengthening and public awareness.
Comment: Schierhorst said that, in a unique arrangement for
the EC, the chief will be ROYG WTO Advisor Nagib Hamim.
Hamim did not mention this to Embassy officials, and post
requests that this information remain close-hold until
publicly announced. End comment.


7. (c) Officials from the EC are in Sanaa the week of
September 6-10 to initiate the program. Schierhorst said
that the one area that he felt the program did not cover was
small and medium size enterprise development. He supports
such an initiative, but a team from Brussels visited Yemen
and concluded that Yemen lacked the business environment to
enable the program to operate.

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Business Community: ROYG Not Prepared
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8. (c) Pol/Econoff raised WTO accession with several
businessmen affiliated with both major political parties (GPC
and Islah) and the Sanaa Chamber of Commerce. Most believe
that the ROYG does not have the economic infrastructure to
support accession. National Trading Company (NATCO) Manager
Nabil Hayel Saeed (protect) conceded that WTO accession is
inevitable, but told Pol/Econoff that the ROYG does not have
the customs, border and tax authorities to support WTO
membership. According to Saeed, NATCO, which operates the
Hewlett-Packard license for Yemen, faces stiff competition
from smuggled computers. Saeed stated that 80 percent of
printers and 50 percent of computers were smuggled into
Yemen, and expressed fear that his business will suffer with
further reduction in trade barriers.


9. (c) Ahmed Bazara (protect),the Toyota distributor and
member of the Sanaa Chamber of Commerce, explained that
because Yemen has poor quality control mechanisms and lacks
industrial products to trade on a world market, accession
would likely have negative consequences for the Yemeni
economy. Echoing Saeed's comments, Bazara said that Yemen is
just not ready to compete on the world market.

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Comment: Marketing WTO Accession to Public
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10. (c) Comment: The ROYG is moving steadily forward on WTO
accession, with or without public support. New initiatives
funded by Geneva to reach out to academics and
parliamentarians may help, but the businessmen Post has
spoken to are looking for concrete improvements in government
services. The ROYG has a tough road ahead in securing public
acceptance of WTO accession if even the businessmen who trade
in western goods and services do not support accession. End
comment.
MISENHEIMER