AMBASSADOR PUSHES FREEDOM AGENDA WITH PM BAJAMMAL,

C O N F I D E N T I A L SECTION 01 OF 03 SANAA 000815

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/20/2016
TAGS: PREL KDEM ECON YM
SUBJECT: AMBASSADOR PUSHES FREEDOM AGENDA WITH PM BAJAMMAL,
PLUS MCA AND TENDERING

REF: A. SANAA 342

B. SANAA 537

C. SANAA 649

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Classified By: Ambassador Thomas C. Krajeski for reasons 1.4 (b) and (d
)


1. (C) SUMMARY. On March 19, Ambassador met with Prime
Minister Abdul Kader Bajammal to discuss the new cabinet and
reform efforts. Ambassador congratulated Bajammal on the new
cabinet and looked forward to future cooperation on political
and economic reforms. Even though Yemen was a difficult
country to govern, Bajammal agreed that reform efforts must
continue, including the restructuring of the committee that
oversees government tenders. On the Millennium Challenge
Account (MCA),Ambassador stressed that if the ROYG wanted to
be reconsidered for the Threshold Program, it must
demonstrate real progress on tackling corruption and
protecting press freedoms. Ambassador also informed Bajammal
that a delegation from the Overseas Private Investment
Corporation (OPIC) would soon visit Yemen to complete a due
diligence report for a proposal to guarantee loans for the $4
billion Yemen Liquefied Natural Gas project. END SUMMARY.

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New Cabinet: It's Hard to Say Good-bye
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2. (C) Ambassador congratulated Bajammal on the formation
of the new cabinet (ref A),noting that the inclusion of
several qualified professionals, especially at key ministries
like Oil, Finance, and Planning, boded well for reform
efforts. The test will be, continued Ambassador, whether or
not these well-intentioned new ministers will receive support
from President Saleh and Bajammal to combat the entrenched
interests within their own ministries. "It's a difficult job
ruling Yemen," Bajammal replied "but we must continue with
these reforms." Even though a change was necessary, Bajammal
said that it was difficult to say good-bye to some of the
ministers, several of whom had been in the government over 20
years. "We cannot have political democracy without economic
democracy," he added, "so we must change our policies."


3. (C) Bajammal said that the ROYG intended to modernize
the Yemeni economy by harmonizing its economic policy with
the GCC countries, especially in the fields of customs,
tendering, banking and taxation. Ambassador noted that the
USG is encouraging GCC countries to integrate Yemen into its
political, economic, and security cooperation and hoped Yemen
was seeing the results of those efforts. Bajammal replied
that the GCC members have been more welcoming of Yemen's
requests for assistance, including the creation of a special
development fund to support large-scale infrastructure
projects such as roads and power generation, but have not yet
agreed to any specific projects. In addition to governmental
support, he hoped to encourage more private investment from
the Gulf during a November investment conference in Aden,
saying that "we need to stop Yemenis from leaving for the
Gulf and give them jobs here."

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MCC: Addressing Corruption and Press Freedoms
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4. (C) "The USG is an investor as well," Ambassador said,
and, like any investor, would only make an investment if the
process was open and transparent. Ambassador noted that
Yemen was suspended in November 2005 from the MCC Threshold
Program for concerns over corruption and press freedom. He
urged the ROYG to implement the specific reforms outlined in
a November letter from MCC CEO John Danilovich, before the
Board of Directors meets again in May to review Yemen's
application.


5. (C) One of the most important steps Yemen could take to
tackle corruption, Ambassador explained, would be to create
an independent tendering committee staffed with experts that
would reward contracts in an open and transparent process.
Bajammal agreed, saying that the ROYG, in cooperation with
the World Bank, had already created new guidelines for an
independent tendering committee and submitted the changes to
Parliament. Bajammal assured the Ambassador that "we are
going to make real changes. This committee will be staffed
by independent, qualified, and honest members."


6. (C) As a demonstration of Yemen's commitment to

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transparency, Ambassador recommended that this new committee
accept a temporary consultant sponsored by the World Bank or
USG, to verify that major international tenders are being
awarded to qualified candidates through a transparent
process. "I accept the recommendation," Bajammal replied.
Ambassador welcomed his response, noting that the last time
the donor community raised the issue of an international
observer on the tendering committee, Saleh abruptly left the
meeting complaining of "colonial" interference (ref B).


7. (C) On MCC concerns over a deterioration in press
freedoms, Ambassador encouraged the ROYG to support a new
press law that would adequately protect journalists from
government intimidation. "We will create a law to protect
both the journalists and the government," Bajammal replied.
"What protection does the government need?" responded
Ambassador. Bajammal explained that in the tribal system
that pervades Yemeni life, the government had a duty to
protect individuals from attacks on them and on their
families' reputations. Disagreeing, Ambassador stressed that
the international community will never consider protecting
Sheikhs or government officials from negative press a
legitimate reason to curtail press freedoms. "Every time you
jail a journalist or close a newspaper, the world is watching
and Yemen's reputation is damaged," warned Ambassador.

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Don't Stop with the Donors: Attracting Private Investment
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8. (C) More important than just convincing donors,
Ambassador emphasized that the real test for long term
economic development was if the ROYG could convince private
investors that Yemen was a good investment. He informed
Bajammal that a delegation from the Overseas Private
Investment Corporation (OPIC) would soon be visiting Yemen to
complete a due diligence report for loan guarantees in
support of the $4 billion Yemen Liquefied Natural Gas (YLNG)
project, which will create an LNG export terminal (septel).
"This is an important project and the entire process must be
open and clean to attract investors," Ambassador said,
especially regarding the large number of contracts that will
be awarded for everything from turbines to cleaning crews.


9. (C) Bajammal replied, "I know we are under the
microscope." He assured Ambassador the ROYG supports an open
contracting process, but noted that the government only
maintained a 24 percent stake in the project. "On the
contrary, the government has great influence," Ambassador
said, and must use that influence to ensure a transparent
process. On overall transparency in the oil sector, Bajammal
informed Ambassador that things were already changing within
the Ministry of Oil, including the removal of the corrupt
head of the Petroleum Exploration and Production Authority
(PEPA),Nabeel Al-Gawsi (septel). (Comment: Contrary to
Bajammal's assurances, Post has already received reports that
government officials are pressuring the "independent" YLNG
contracting committee to award contracts to their
well-connected cronies. End Comment).

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Elections: The Opposition Just Doesn't Understand Democracy
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10. (U) Ambassador expressed hope that preparations for and
voting during the September Presidential and local council
elections would also be conducted in an open and transparent
manner. "The USG will not be involved in the politics, but
we, along with the rest of the world, will be watching to see
if the elections are free and fair," Ambassador emphasized.
Bajammal replied that democracy was slowly moving forward in
Yemen, but complained that the opposition did not understand
democracy and chose instead to complain incessantly about the
composition of the independent elections commission (ref C).
"We can't re-write the election law over night, this is a
democracy," Bajammal said, adding that while the ROYG could
not add more opposition members to the elections commission,
the opposition was welcome to participate in the various
regional and local committees that monitor voter registration
and polling stations. (Comment: While the elections
commission may be nominally independent, in reality, its is
headed by a ruling-party insider and the government exerts a
significant amount of control over its activities. End
Comment).

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Comment
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11. (C) Prime Minister Bajammal was certainly on message with
President Saleh's directive to the new cabinet to implement
economic and political reforms, as have all the new ministers
during their introductory meetings with Ambassador. While
post is still encouraged by the inclusion of a number of
professional and capable bureaucrats in key positions within
the new cabinet, the retention of the corrupt and powerful
Bajammal remains a disappointment.


12. (C) Although Bajammal spoke positively about reform,
the true test will be if he and President Saleh empower the
ministers to remove corrupt individuals from their ministries
and implement real reform. The removal of the corrupt PEPA
director and the acceptance of an international observer for
major international tenders are positive steps forward. Many
more steps are needed, however, to ensure comprehensive and
lasting reform that will benefit Yemen's rapidly expanding
population. Post will continue to encourage the ROYG to take
more concrete action on implementing reforms before the May
MCC board meeting.
Krajeski