US embassy cable - 03SANAA2250

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002250 
 
SIPDIS 
 
STATE PASS TO USTR - BUNTIN 
 
E.O. 12958: DECL: 09/07/2013 
TAGS: ETRD, ECON, EINV, YM, ECON/COM 
SUBJECT: YEMEN: WTO ACCESSION UPDATE 
 
Classified By: CDA A.G. Misenheimer for reasons 1.5 (b) and (d). 
 
1. (u) Summary: Minister of Industry and Trade Khaled Rajeh 
Sheikh will lead the Yemeni delegation to the WTO ministerial 
in Cancun.  Yemen is moving steadily forward on WTO accession 
and expects to accede in 3-5 years.  The European Commission 
(EC) is launching a five-year, seven million Euro project to 
provide technical assistance to Yemen's accession.  While the 
ROYG is pushing accession, the business community is voicing 
strong concerns over Yemen's preparedness.  End summary. 
 
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Hoping for the Best Deal in Cancun 
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2. (u) Minister of Industry and Trade Khaled Rajeh Sheikh and 
Advisor to the Minister and Chief of WTO Coordination and 
Communication Nagib Hamim will travel to Cancun for the WTO 
Ministerial, September 10-14.  Hamim told Pol/Econ Chief and 
Pol/Econoff on August 25 that the ROYG was examining the 
accession process of Nepal and Cambodia, in order to obtain a 
more favorable accession agreement for Yemen.  Hamim said 
that the ROYG is also monitoring the outcome of the 
discussion on agricultural subsidies.  Commenting that Yemen 
is a net food importer, Hamim said he supports a gradual 
reduction in agricultural subsidies. 
 
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WTO Accession Still 3-5 Years Out 
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3. (u) Deputy Minister Iqbal Bahder told participants at the 
June 23-25 Ministry of Industry and Trade sponsored National 
Integrated Framework (IF) Workshop that he expects Yemen's 
WTO accession to take 3-5 years.  The purpose of the workshop 
was to review the results of the Diagnostic Trade and 
Integration Studies on Yemen completed in 2002.  Government 
and non-government representatives determined an action plan 
to enhance and strengthen the ROYG economy.  Several 
academics and Islah-oriented businessmen criticized the IF 
study for neglecting the ROYG role in job creation.  The 
completed action plan focuses on infrastructure development, 
building roads, job-training, and improving the quality of 
exports. 
 
4. (u) The Dutch, who are the ROYG's partner in the IF 
process, circulated the action plan to the donor community 
and will hold meetings throughout the Fall to coordinate 
assistance plans.  At the same time, ROYG officials will 
combine the results of the IF study with the World Bank's 
Poverty Reduction Strategy into a single reform strategy. 
 
5. (u) According to Hamim, Yemen is finalizing its answers to 
the 167 questions submitted from the U.S., EC and Australia 
on Yemen's Memorandum of Foreign Trade Regime. Hamim expects 
the questions to be answered by the end of the year, which 
will enable Yemen to have its working party meeting early in 
2004.  On a recent visit to Geneva, Hamim obtained approval 
for two outreach seminars funded by Geneva to discuss WTO 
accession with academics and parliamentarians, which will be 
held this fall. 
 
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EC to Fund Five Year Accession Assistance Program 
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6. (c) Head of the Yemen office of the European Commission 
Reiner Schierhorst (protect) described to Pol/Econ Chief and 
Pol/Econoff the EC's five-year 7 million Euro program to 
assist Yemen in its accession process on August 27.  The EC 
will fund a WTO advisor at the Ministry of Industry and Trade 
to oversee its program, which includes assistance for 
accession, institutional strengthening and public awareness. 
Comment: Schierhorst said that, in a unique arrangement for 
the EC, the chief will be ROYG WTO Advisor Nagib Hamim. 
Hamim did not mention this to Embassy officials, and post 
requests that this information remain close-hold until 
publicly announced.  End comment. 
 
7. (c) Officials from the EC are in Sanaa the week of 
September 6-10 to initiate the program.  Schierhorst said 
that the one area that he felt the program did not cover was 
small and medium size enterprise development.  He supports 
such an initiative,  but a team from Brussels visited Yemen 
and concluded that Yemen lacked the business environment  to 
enable the program to operate. 
 
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Business Community: ROYG Not Prepared 
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8. (c) Pol/Econoff raised WTO accession with several 
businessmen affiliated with both major political parties (GPC 
and Islah) and the Sanaa Chamber of Commerce.  Most believe 
that the ROYG does not have the economic infrastructure to 
support accession.  National Trading Company (NATCO) Manager 
Nabil Hayel Saeed (protect) conceded that WTO accession is 
inevitable, but told Pol/Econoff that the ROYG does not have 
the customs, border and tax authorities to support WTO 
membership.  According to Saeed, NATCO, which operates the 
Hewlett-Packard license for Yemen, faces stiff competition 
from smuggled computers.  Saeed stated that 80 percent of 
printers and 50 percent of computers were smuggled into 
Yemen, and expressed fear that his business will suffer with 
further reduction in trade barriers. 
 
9. (c) Ahmed Bazara (protect), the Toyota distributor and 
member of the Sanaa Chamber of Commerce, explained that 
because Yemen has poor quality control mechanisms and lacks 
industrial products to trade on a world market, accession 
would likely have negative consequences for the Yemeni 
economy.  Echoing Saeed's comments, Bazara said that Yemen is 
just not ready to compete on the world market. 
 
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Comment: Marketing WTO Accession to Public 
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10. (c) Comment: The ROYG is moving steadily forward on WTO 
accession, with or without public support.  New initiatives 
funded by Geneva to reach out to academics and 
parliamentarians may help, but the businessmen Post has 
spoken to are looking for concrete improvements in government 
services.  The ROYG has a tough road ahead in securing public 
acceptance of WTO accession if even the businessmen who trade 
in western goods and services do not support accession.  End 
comment. 
MISENHEIMER