DPM SOFAN SEEKS U.S. POLITICAL COMMITMENT FOR

UNCLAS SECTION 01 OF 02 SANAA 003098

SIPDIS

STATE FOR USTR - NOVELLI/BUNTIN/HICKS

E.O. 12958: N/A
TAGS: ECON ETRD PGOV YM ECON COM
SUBJECT: DPM SOFAN SEEKS U.S. POLITICAL COMMITMENT FOR
YEMEN'S WTO ACCESSION



1. (SBU) Summary. Deputy PM and Minister of Planning and
International Cooperation Ahmed Sofan reviewed development
cooperation and sought strong political support for Yemen's
WTO accession bid from visiting Deputy Assistant Secretary
Philo Dibble on December 15. Sofan complained of a lack of
Saudi-Yemeni economic cooperation, affirmed the importance of
economic reform, and said that WTO accession was the key to
expanding direct foreign investment in Yemen. End summary.

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Sofan: Security Costs Money, Economy Down
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2. (SBU) After praising U.S.- Yemen development cooperation,
Sofan raised what is becoming a persistent theme among senior
ROYG officials -- enhancing security to fight the GWOT costs
money and development funding suffers. Sofan blamed high
inflation in Yemen and large budget deficits on the necessity
to fund two Ministries, Interior and Defense, in order to
meet Yemen's security requirements. (Note: Yemen's inflation
problems are not merely a result of military spending, Yemen
is very susceptible to international price fluctuations
because 76 percent of its food is imported. For instance,
last year bread prices doubled due to high international
demand for wheat.)


3. (SBU) "Yemen needs U.S. advice and cooperation," said
Sofan, "but the challenges are great." Highlighting Yemen's
development needs, Sofan claimed that Yemen receives only 30
USD per capita in development assistance, whereas Egypt
receives 1,200 USD and Zambia 120 USD. Warning that Yemen's
budget deficit is growing, and this year will surpass last
year's deficit of just around 3 percent of GDP, Sofan claimed
that high oil prices are not enough to cover Yemen's costs.
(Note: Most experts predict a steady decline in oil
production and revenue in the next five years. End Note.)
Sofan told DAS that the only way to address high poverty and
a 31 percent unemployment rate is to move ahead with economic
reform and reduce subsidies.

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Riding on the Thobe-tails of Saudi Arabia
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4. (SBU) Sofan explained recent Yemen forays to expand Yemen
- Saudi economic cooperation, sharing that the ROYG had
presented a paper to the Saudis outlining suggested
investment packages, alternative work sectors for Yemeni
laborers, and turning Yemen into an open market for Saudi
investment. Sofan said he traveled to Riyadh seeking
economic assistance and argued that regional stability will
be greatly enhanced by a prosperous Yemen. Expressing
concern for the many Yemeni workers who are losing jobs due
to Saudiazation, Sofan said he proposed Yemen and KSA work
together to find alternative jobs for Yemeni guest workers.
KSA promised to "study" the proposal, but Sofan said that
since the offer was made five months ago, the ROYG has heard
nothing.

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Sofan on WTO Accession: "Run Don't Walk"
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5. (SBU) Sofan petitioned for the USG to give Yemen the same
attention and commitments on WTO accession as Iraq, and for
Yemen to be included in a "fast-track initiative" on
accession. Sofan suggested that if the U.S. wants the Middle
East to prosper, economic support must extend beyond Iraq and
asked for a "political commitment" from the United States to
speed Yemen's accession through the WTO. (Note: Post is
unaware of an Iraq "fast track" initiative on WTO accession.
End Note.)


6. (SBU) Sofan pointed to WTO accession as a way to attract
foreign direct investment. Admitting that the government has
not explained its WTO accession plan well internally, Sofan
said the ROYG will hold workshops to help Parliamentarians
understand the meaning and benefits of accession. Sofan
added that Yemen's private sector is not as advanced as other
countries' and therefore not pushing for accession. Sofan
said that he has urged the Minister of Industry and Trade to
"run not walk to accession." In addition to political
support, Sofan asked for technical assistance, as was offered
on the margins of the November 18 Trade Investment Framework
Agreements (TIFA) Talks at USTR in Washington.

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Sofan Raising Expectations
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7. (SBU) Comment: Following TIFA talks last month, Sofan
seems heavily engaged in Yemen's WTO accession and is pushing
the rest of the ROYG to follow suit. His appeal for USG
political support at Geneva, suggests that Sofan sees WTO
accession as a political, rather than a practical and
technical challenge. However, Yemen still has much to do on
the technical side. It must redraft laws, gain Parliamentary
approval and prepare its offers on key WTO areas such as
telecommunications, insurance and banking services. Sofan
sees WTO accession as a step to a coveted Free Trade
Agreement. End comment.


8. (U) DAS Dibble cleared on this cable.
KRAJESKI