Identifier
Created
Classification
Origin
03SANAA2784
2003-11-29 14:47:00
CONFIDENTIAL
Embassy Sanaa
Cable title:  

USAID NATSIOS EXPLAINS MCA TO PRESIDENT SALEH

Tags:  EAID ECON PREL YM DEMOCRATIC REFORM COM 
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C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002784 

SIPDIS

USAID FOR ADMINISTRATOR, ANE/MEA KFREEMAN AND ANE/SPO
JCARLSON

E.O. 12958: DECL: 11/04/2013
TAGS: EAID ECON PREL YM DEMOCRATIC REFORM ECON COM
SUBJECT: USAID NATSIOS EXPLAINS MCA TO PRESIDENT SALEH


Classified By: Classified by Ambassador Edmund J. Hull for reasons 1.5
(b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002784

SIPDIS

USAID FOR ADMINISTRATOR, ANE/MEA KFREEMAN AND ANE/SPO
JCARLSON

E.O. 12958: DECL: 11/04/2013
TAGS: EAID ECON PREL YM DEMOCRATIC REFORM ECON COM
SUBJECT: USAID NATSIOS EXPLAINS MCA TO PRESIDENT SALEH


Classified By: Classified by Ambassador Edmund J. Hull for reasons 1.5
(b) and (d).


1. (c) Summary: On November 3 USAID Administrator Natsios
presented Millennium Challenge Account (MCA) criteria to
President Saleh, and said Yemen could qualify if Yemen
improved in the "Governing Justly" category. While initially
questioning the need for Yemen to make progress on such
issues as good governance and corruption, Saleh agreed to
have Post discuss potential reforms with Deputy Prime
Minister (DPM) and Minister for Planning and International
Cooperation (MOPIC) Ahmed Sofan. Previously, DPM Sofan
outlined Yemen's development history and raised the present
challenges of economic expansion and high population growth
to Natsios. Natsios also met with the Minister of Health to
hear about USAID's health projects and discussed potential
programs to strengthen local councils with the Governor of
Aden. End summary.


2. (c) USAID Administrator Andrew Natsios visited Sanaa 2-4
November, 2003 and was accompanied by Connie Newman AA/AFR,
Kate Almquist, Special Assistant for Policy and Joanne
Giordano, DAA/LPA. Post's Development team briefed Natsios
on its development strategy, including activities in health,
education, agriculture, economic development and democracy
and governance. After a brief tour of the Embassy, Natsios,
Ambassador, USAID Representative (AIDRep),USAID Health
Specialist and Pol/Econoff (notetaker) flew to Aden to meet
with President Saleh, Deputy Prime Minister Sofan, Governor
of Aden Yahia al-Shuaibi and Minister of Health Mohammed
al-Noemi.

--------------
President Saleh Questions MCA Criteria
--------------


3. (c) After relaying greetings from President Bush and
Secretary Powell, Natsios told Saleh that President Bush

SIPDIS
ordered the opening of the Yemen USAID mission to promote the
bilateral relationship. Turning to possible areas of
increased U.S. development assistance, Natsios outlined

President Bush's Millennium Challenge Account (MCA)
initiative Explaining that it was designed to reward a small
number of countries (12-15),Natsios said the MCA is a new
concept in development assistance because countries are
judged in several categories that relate to how well a
country is governed. In the MCA categories of "Investing in
People" and "Economic Growth," Natsios said, Yemen does
well. However, in the "Governing Justly" category, which
mainly deals with issues surrounding corruption and
governance, Yemen falls short. (Note: Post believes Yemen
meets the minimum MCA requirement only in the corruption
indicator of the six "Governing Justly" criteria. Any
action taken by the ROYG to further reduce corruption will
raise Yemen,s scores in the other five categories. End
Note.)


4. (c) Saleh questioned Natsios extensively on the sources of
information that determine MCA qualification, and said that
he does not agree with the World Bank opinion of democracy
and corruption in Yemen. Adding that "we don't accept the
idea that there is corruption," Saleh said that everything in
Yemen happens in "complete transparency" and cited open
tendering for ROYG contracts and salary increases for judges
as two of the reforms the ROYG has undertaken. Criticizing
the World Bank for sending incorrect information to
Washington, Saleh said that Yemen is not a Gulf State, "we
are a poor country and don't have corruption."

-------------- ---
Saleh: CT Cooperation Should Count for Something
-------------- ---


5. (c) Highlighting the ROYG's counterterrorism cooperation
with the U.S., Saleh complained that the value of USG
assistance does not match the political cost of supporting
the U.S. and argued that more assistance should be given to
Yemen. Natsios replied that MCA qualification is distinct
from other forms of USG assistance, such as the type Yemen
already receives. MCA, Natsios explained, is intended for
countries with a proven record of reform and serves as an
incentive for countries to make politically difficult
decisions.

--------------
Saleh: Stay Away From the Diesel Subsidy
--------------


6. (c) Yemen may be considered for MCA, Natsios said, because
President Saleh and his Ministers have shown that they can
make tough reforms and that Yemen is close to qualifying.
Otherwise, Natsios said, we would not be discussing MCA
qualification. Blaming his earlier questioning of MCA
criteria on the effects of his Ramadan fast, Saleh closed the
meeting by saying that Post could speak with DPM Sofan about
necessary reforms as long as the diesel subsidy is not
discussed. Claiming that there would be "revolution in the
streets" if the ROYG heeded the World Bank and IMF
recommendation to cut subsidies, Saleh said reducing the
diesel subsidy is not politically feasible. (Background:
The IMF and World Bank have been encouraging the ROYG to
reduce the diesel and gas subsidy which costs the ROYG 3% of
its GDP. The subsidy is widely believed to do little to help
farmers reduce costs, but supplies a large smuggling
business. Riots occurred when subsidies were reduced on food
and gas in 1997; however, in 2001 when the diesel subsidy was
last reduced there was little visible protest because the
ROYG announced a concomitant pay increase for civil servants.
End background.)

--------------
DPM Sofan and Governor of Aden
--------------


7. (c) Earlier, DPM Sofan described Yemen's development
history to Natsios, and identified Yemen's 3.5% population
growth rate and slow economic growth as issues of immediate
concern. While commenting that Yemen still had a long away
to go in democracy and governance areas, Sofan touted recent
improvement in the good governance category of the World
Bank's Country Policy and Institutional Assessments (CPIA).
Natsios praised Yemen's development progress, but added that
MCA qualification could lead to even more development
assistance if Yemen improved in such areas as corruption and
transparency. When Aden Governor al-Shaubi joined the
meeting, Natsios and the Ambassador raised the possibility of
USG assistance to Aden local councils as a way to support
ROYG decentralization initiatives.

--------------
Health: Key Sector in Development Strategy
--------------


8. (c) Natsios and Minister of Public Health and Population,
Dr. Mohammed al-Noemi, agreed on the importance of a lower
population growth rate if the ROYG is to meet its economic
development goals, including basic education for all, reduced
mortality and improved employment opportunities. (Comment:
At the current 3.5% growth rate the population will double to
40 million in twenty years, just about the time that the
World Bank estimates that Yemen,s proven oil reserves will
be depleted. End Comment.) Natsios told the Minister that
improved health is a key goal of the USG development program
in Yemen and that the USG looks forward to assisting the
Minister in implementing health reforms.

--------------
Comment: MCA Incentive for Democratic Reform
--------------


9. (c) Comment: While initially questioning Yemen's
provisional "Governing Justly" scores that may not qualify
Yemen for MCA in the first year, Saleh seemed to come around
to Natsios' argument that the amount of money available for
MCA qualifying countries may be worth democracy and
governance reforms. Post has engaged with ROYG interlocutors
at every level describing what is known about MCA criteria
and where Yemen needs to show improvement. Natsios' pitch may
give incentive to President Saleh to heed the growing donor
push in Yemen for more progress in the areas of democracy and
governance. End Comment.


10. (u) Mr. Natsios cleared this cable.
MISENHEIMER