UNABATED POVERTY AND MALNUTRITION: YEMEN REQUESTS

UNCLAS SECTION 01 OF 05 SANAA 002460

SIPDIS

STATE - PASS TO USDA FAS. USDA - PASS TO USDA/FAS/EXPORT
CREDITS FOR MARY CHAMBLISS, DEPUTY ADMINISTRATOR AND
USDA/FAS/EXPORT CREDITS FOR RON CROUSHORN, DIRECTOR,
PROGRAMMING DIVISION. CAIRO - PASS TO AGRICULTURAL
COUNSELOR ASIF CHAUDHRY AND AGRICULTURAL ATTACHE FREDERICK
GILES.

E.O. 12958: N/A
TAGS: EAGR EAID YM
SUBJECT: UNABATED POVERTY AND MALNUTRITION: YEMEN REQUESTS
FY06 USDA FOOD AID THROUGH PL 480, TITLE I AND FOOD FOR
PROGRESS

REF: STATE 00139203


1. (U) Summary: Embassy Sanaa seeks FY-2006 PL-480 Food for
Progress commodities for rural agricultural development
program assistance in counterterrorism, poverty alleviation,
and critical water needs. Post requests assistance in the
form of $4.4 million in concessional loans and $15.5 million
in donations.

Section 1: Yemen Situation Report
Section 2: USG Coordination with Yemen Stakeholders
Section 3: Projects and Commodities Requested
Appendix: Tables on Market Size and Displacement


-------------- --------------
SECTION 1: YEMEN SITUATION REPORT: RURAL FARMERS IN NEED,
WIDESPREAD POVERTY AND MALNUTRITION
-------------- --------------


2. (SBU) Yemen is among the least developed countries in the
world. Crushing poverty, an explosive population growth
rate, and pervasive malnutrition combine to form an
extraordinary challenge for poor, rural, subsistence-farming
families. Yemen's population growth rate is the highest in
the Middle East, at an estimated 6.8 children per woman. The
median age is less than 15 (Yemen Census 2004),and the life
expectancy of an infant born in 2004 is only 59 years (World
Bank 2004). Malnutrition levels closely rival some
sub-Saharan African countries. According to a 2003 UNICEF
survey, almost 50 percent of the children under age 5 are
moderately to severely malnourished. For the children, who
now comprise more than fifty percent of the population, there
is little hope for economic advancement. Official
unemployment stands at 35 percent, but according to
international observers the true figure hovers closer to 50
percent. Out of desperation, many young people seek
employment across the border, sometimes
when they are younger than ten years old. According to
UNICEF Director Ramesh Shrethra, reports indicate nearly
every single household in the border governorates of Mahweit,
Hajja and Saada have at least one or two children working in
Saudi Arabia.


3. (U) Despite these obstacles, the Yemeni government has
demonstrated an eagerness to address economic issues through
its efforts to initiate development programs targeting the
country's agricultural economy. They are doing so in
partnership with donors such as Holland, the UN, UN Food and
Agricultural Organization, the World Bank, as well as the US
through the USDA food aid programs.


-------------- --------------
SECTION 2: USG COORDINATION WITH YEMEN STAKEHOLDERS
-------------- --------------


4. (U) Since the beginning of the USDA food aid program in
Yemen in 1999, the Embassy has been working closely with USDA
officials and Yemeni government officials at the Social Fund
for Development (SFD),the Public Works Project (PWP),
Ministry of Agriculture and Irrigation (MAI),and the
Ministry of Planning and International Cooperation (MOPIC) to
program the USDA food aid funds. Yemen has received on $10
to $22 million annually to focus on rural agricultural
development in Yemen.


--------------
SECTION 3: PROJECTS AND COMMODITIES REQUESTED
--------------


5. (U) Despite the many challenges facing Yemen, it has
established itself in the region as one of the few countries
to establish democratic institutions. Since 1995, the Yemeni
Government has pursued an economic reform strategy, based on
free-market principles, guided by the IMF/World Bank. Yemen
continues its commitment to introduce or expand free
enterprise elements into their agricultural economy, and as
such is a prime candidate for the PL 480 program. To support
the Government in developing the agricultural sector, Post
intends to utilize donated commodities toward free enterprise
initiatives in rural agricultural communities. Such project
will include rural financial credit access, women in
agriculture, livestock improvement, plant and animal
productivity improvements, and marketing of agricultural
products. These programs fit well with the objectives of the
Food for Progress program in that they support agricultural
development and address critical humanitarian needs in Yemen.



6. (U) The Embassy proposes use of the monetized commodities
for the following programs:

PROJECT 1: Rural Financial Credit System
--------------

a) Value and Type of Commodity requested: $4.0 million in
long grain, parboiled rice and $340,000 in vegetable oil
b) Possible NGO/government implementers: CARE
International; Taiz Women's Union; the quasi-governmental
microfinance institution, SCDF; the Commercial and
Agricultural Credit Bank

c) Use of Commodities or Revenues: The government will
sell the commodities and use the proceeds to develop a rural
financial credit or village banking system for poor
subsistence farmers. Funds will be used to train local
outreach workers, formulate education campaigns, create a
monitoring and accounting system, hire accountants and
consultants, and then use $2 million as capital.

d) Justification for Request: Opportunities in Yemen for
small borrowers in rural areas are almost non-existent due to
structural flaws in the financial and legal sectors. Despite
the aversion of commercial banks to offer individual lending,
especially to agriculture, some microfinance and small and
medium enterprise initiatives have shown surprising results
in rural areas. Several of these organizations have the
capacity to absorb increased capital, and to offer
agricultural and small business loans to women and rural
Yemenis.

e) Market Displacement Analysis: Post recommends long
grain, parboiled rice because its donation will not affect
local production or commercial sales. Yemen does not produce
rice and the donation will account for just 8 percent of the
total market in Yemen.


PROJECT 2: Women in Agriculture
--------------

a) Value and Type of Commodity Requested: $4.0 million of
soft white wheat

b) Possible NGO/Government Implementers: ADRA
International; local UN-certified NGO, the Charitable Society
for Social Welfare; Social Fund for Development.

c) Expected Use of Commodities or Revenues: This program
will focus on facilitating the education of women in new
methods of water-efficient irrigation and crop production.
In addition to teaching women about water-conservation,
irrigation methods, modern and safe pesticides, and soil
replenishment, the program will also integrate maternal and
child health and nutrition training.

d) Justification for Request: In Yemeni society, rural
women perform the majority of agricultural work. As such,
effective and efficient methods for crop management are best
taught to women. In addition, the maternal death rate from
childbirth is an astronomical 350 deaths per 100,000 live
births in Yemen according to UNICEF. The program will teach
health, prenatal, and child care skills that will help
address this dire issue along with basis nutrition.

e) Market Displacement Analysis: Post recommends soft
white wheat because its donation will not affect local
production or commercial sales. Soft white wheat is a key
staple in the Yemeni diet and highly preferred over other
forms of wheat. In addition, domestic production accounts
for only 5 percent of the market and the total donation for
all programs in soft white wheat will amount to a mere 2
percent of the market.


PROJECT 3: Livestock Sector Improvements
--------------

a) Value and Type of Commodity Requested: $2.5 million in
corn and $920,000 in soybean meal

b) Possible NGO/Government Implementers: Red Sea
Livestock Trade Commission; Livestock Division of the
Ministry of Agriculture and Irrigation; Social Development
Fund, Public Works Project; CARE International

c) Expected Use of Commodities or Revenues: The
Government will sell the commodities and use the proceeds to
develop a quarantine station in the port of Mokha. The
facilities will include containment pens, a laboratory,
quarantine facility for sick animals and a processing center
to accept healthy incoming livestock to enter Yemen
certified. This project is part of a network of
independently developing quarantine stations in Djibouti,
Kenya, and other countries on both sides of the Red Sea
livestock trade. The Djibouti program is funded by USAID and
this program will connect to the work already in progress
there. Training in Mokha and coordination with the entire
network will provide a more seamless tracking system for
individual livestock as they move across both land and sea
borders on both sides of the Red Sea for disease control
throughout the region.

d) Justification for Request: In the fall of 2000 to the
winter of 2001, the Yemeni cattle market collapsed as a
result of the outbreak of Rift Valley Fever. Rift Valley
Fever entered Yemen via cattle shipped from Somalia on a
variety of vessels which were unlicensed and without proper
import permits to Yemen, said David Ward, Senior Livestock
Advisor, FAO Rome. Yemeni Ministry of Agriculture Livestock
Director Dr. Ghaleb Al-Iryani states that there were more
than 1500 Yemenis who died from the epidemic. This
information was confirmed by USAID Yemen Senior Economic and
Agricultural Advisor Dorvin Stockdale. The same factors that
allowed the epidemic to begin and spread remain unchanged.
Yemen is ripe for another outbreak of a variety of diseases
according to a 2005 US Department of Defense review of the
livestock situation in Yemen.

f) Market Displacement Analysis: Post recommends this
commodity because its donation will not affect local
production or commercial sales. There is no domestic corn or
soybean meal production, and PL-480 donation will each
account for only four percent of the market.


PROJECT 4: College Scholarships for Study of Agricultural
Sciences by Rural Disadvantaged Students
--------------

a) Value and Type of Commodity Requested: $2.0 million of
soft white wheat and $1.75 million in wheat flour

b) Possible NGO/Government Implementers: local NGO, Dar
Al-Rahma; Social Fund for Development

c) Expected Use of Commodities or Revenues: The proceeds
will develop a university scholarship program both at
undergraduate and graduate levels for disadvantaged students
from rural areas of Yemen for overseas study. A joint US and
Yemeni committee will select the participants from rural
areas through interviews and academic achievement. The
committee will consist of representatives from AMIDEAST,
local universities representatives, USAID, US Embassy, and
local organizations such as Dar Al-Rahma. In order to
participate in the program, the candidates must demonstrate
strong academic potential and maintain an acceptable GPA
while in either high school or university. Candidates will
be required to study within a field of agriculture such as
agronomy, animal science, soil science, water and irrigation
management, agricultural economics, agri-business management
and other fields of agriculture which would have benefit for
Yemen. Funds for per diems and stipends would be provided to
participants through
any NGO or government agency administering the program and
would also provide for initial employment opportunities
within rural areas upon completion of studies.

d) Justification for Request: Seventy percent of the
population is employed in the agricultural sector within
Yemen. However much of this sector is at subsistence level
with job opportunities limited. Agricultural education is
limited as are opportunities for new technologies to be
introduced or the agricultural sector to be transformed. With
improved agricultural education and the introduction of ideas
from Yemeni's trained outside of Yemen, which is
traditionally a closed society, this will allow for improved
agricultural techniques and marketing methods to be
introduced by Yemeni's themselves.

e) Market Displacement Analysis: Ninety percent of the
wheat and wheat flour market in Yemen consists of unprocessed
wheat. Most wheat is milled in one of five large capacity
flour mills or in thousands of small capacity neighborhood
mills throughout the country. As such, the total program
requests a ratio of approximately 80 percent wheat to 20
percent wheat flour. The total request for soft white wheat
and wheat flour comprises a 2 and 4 percent displacement
respectively.


7. (U) The Embassy would like to propose the following
program using the commodities offered in the concessional
loans:


PROJECT 5: Plant Productivity Improvements
--------------

a) Value and Type of Commodity Requested: $4.4 million of
long grain, parboiled rice

b) Possible NGO/Government Implementers: Mercy Corps;
CARE International; ICARDA

c) Expected Use of Commodities or Revenues: The program
will facilitate the training and introduction of genetically
improved crops. These crops must be selected on the basis of
their water-conservancy, high nutritional value, and health
and safety benefits to the soil. The proceeds of the
commodity sales will fund ongoing agricultural technology and
biotech education programs throughout the country to augment
this initiative.

d) Justification for Request: Only three percent of Yemen
is considered arable land with much of the country being arid
or semi-arid. Water is considered to be one of the most
valuable commodities in Yemen both for agriculture and human
consumption. Land and water are both a natural resource in
scarce supply. This in combination with the malnutrition
cited earlier, improvements in nutrition availability and
productivity provided by genetically improved crops would
lift the tide of poverty, water scarcity, and malnutrition in
Yemen.

e) Market Displacement Analysis: Post recommends long
grain, parboiled rice because its donation will not affect
local production or commercial sales. Yemen does not produce
rice and import account for just 8 percent of the total
market in Yemen.


--------------
APPENDIX
--------------

TABLE A: Yemen Bulk Commodities Market, 2006 Estimate

(I) (P) (C) %(P) %(I)
Commodity Import Domestic Total of of
Productn Consumptn (C) (C)
(MT) (MT) (MT)
-------------- --------------
Soft White Wheat 1,600,000 103,800 1,703,800 6% 94%
Wheat Flour 160,000 0 n/a 0% 0%
Corn 292,000 32,800 324,800 10% 90%
Soybean Meal 90,000 0 90,000 0% 100%
Rice 295,000 0 295,000 0% 100%
Vegetable Oil 170,000 59,000 229,000 26% 74%
-------------- -------------- (S
ource: Ministry of Industry and Trade 2003, distributor
interviews 2005)



TABLE B: Yemen Bulk Commodities Market Displacement, 2006
Estimates for PL-480 Commodity Request

(I) (D) (P) (C) %(D)
Commodity Import PL-480 Domestic Total of
Productn (C)
(MT) (MT) (MT)
-------------- --------------
Soft White Wheat 1,600,000 30,000 103,800 1,710,800 2%
Wheat Flour 160,000 7,000 0 165,000 4%
Corn 292,000 14,000 32,800 338,000 4%
Soybean Meal 90,000 4,000 0 97,000 4%
Rice 295,000 24,000 0 299,000 8%
Vegetable Oil 170,000 1,000 59,000 232,000 .4%
-------------- --------------
(Source: Ministry of Industry and Trade 2003, distributor
interviews 2005)


TABLE C: Commodity Breakdown by Project

-------------- --------------
Project 1: Rural Financial Credit System
$4.0 million 11,428 MT long grain, parboiled rice
$340,000 1,000 MT vegetable oil

Project 2: Women in Agriculture
$4.0 million 20,000 MT soft white wheat

Project 3: Livestock Sector Improvements
$2.52 million 14,000 MT corn
$920,000 4,000 MT soybean meal

Project 4: Scholarships for the Rural Disadvantaged
$2.0 million 10,000 MT soft white wheat
$1.75 million 7,000 MT wheat flour

Project 5: Plant Productivity Improvements
$4.4 million 12,571 MT long grain, parboiled rice

Total:
$19,930,000 80,000 MT
-------------- --------------
Krajeski