YEMEN: DONOR COMMUNITY FRUSTRATION RISES

C O N F I D E N T I A L SANAA 000500
SIPDIS
DEPT PASS USAID FOR NATHAN PARK
E.O. 12958: DECL: 03/23/2019
TAGS: EINV EAID ECON AORC YM
SUBJECT: YEMEN: DONOR COMMUNITY FRUSTRATION RISES
REF: 08 SANAA 1755
Classified By: CDA Angie Bryan for reasons 1.4(b) and (d).

1. (C) SUMMARY: Yemen,s donor community is concerned about
the long-term effectiveness of aid to Yemen. Donors worry
about the lack of political commitment to development both at
the presidential and the parliamentary levels. Donors remain
committed to policy reform and supportive of private sector
investment and NGO work. Coordination within the greater
development community (and not just the primary Western
actors) is important to future success. END SUMMARY.

2. (C) In a March 16 development community meeting, donor
country representatives expressed concern over the situation
in Yemen. Sue Wardell, Senior Director of the UK Department
for International Development (DFID),characterized Yemen as
at risk of becoming a failed state. Donors expressed concern
that development assistance may not be making a significant
difference in the long term and that a slow-moving
humanitarian crisis is in the making. They also noted that
although multiple international aid organizations are focused
on issues of development and human welfare in Yemen, the
plight of the Yemeni people appears to have received little
attention from political power brokers.

3. (C) Donors expressed their common and increasing concern
that President Ali Abdullah Saleh does not make Yemen,s
development a priority. They feel that his lack of
leadership is a major roadblock to the effective
implementation of development assistance. There is a
distinction between the impact the development community is
having at the technical level and at the political level.
While work within the technical ministries has been slow,
there have been some gains. Senior Yemeni leaders still do
not recognize that development contributes to stability
within Yemen. Therefore, they prevent progress on
development issues at the political level.

4. (C) The development community feels that it must work
around the parliament and endemic corruption in order to
implement its programs effectively. UNDP representative
Pratibha Mehta described a complete disconnect between
parliamentarians and their constituents. In her interactions
with the population of the Hadramout disaster area (reftel),
who represent the poorest segments of Yemeni society, she
noted a complete lack of expectation of help from the central
government. Working around corruption has proven to be even
more difficult. The Kuwaiti ambassador said that his
country,s Hadramout disaster aid was completely diverted and
implied that "everything was stolen" by local government
officials.

5. (C) The development community believes civil service and
public finance reform, as well as action to reduce subsidies,
particularly the diesel subsidy, is critical at this
juncture, given the country’s precarious financial state.
Members of the development community are supportive of NGOs,
which are becoming more numerous in Yemen. Donors are also
supportive of private sector-led Foreign Direct Investment
(FDI),but recognize the difficulty of operating in the
Yemeni environment. Terrorism is not the only
problem--tribal issues also play a major role in inhibiting
FDI. Siemens, for example, cannot activate a gas-fired
electric power plant in Mareb because of a tribal dispute
along its 40 kilometer long transmission line.

6. (C) The mood at the March 16 meeting reflected the
concerns of the donor community who met throughout February
in a series of meetings hosted by the UK and German
ambassadors. Based on the consensus arrived in these
meetings, the US, UK, Dutch, and German ambassadors met with
Deputy Prime Minister of Economic Affairs and Minster of
Planning and International Cooperation (MOPIC) Abdul Karim
Al-Arhabi on March 9 to convey donor concern about the lack
of high-level attention to macro policy reform and to
encourage a more aggressive role by MOPIC. This donor group
intends to pursue meetings with the Prime Minister and
President.

7. (C) COMMENT: Already a difficult task, effectively
implementing development assistance within Yemen is getting
harder. In a time of economic strife due to the global
economic crisis, the ROYG is struggling to balance its budget
and at risk of receiving reduced development assistance from
donors as they struggle with their own budgets. Coordination
within the greater development community, including members
of the GCC, who tend to act independently of the
international community and each other in Yemen, will be
crucial to future success. END COMMENT.
BRYAN