US embassy cable - 04SANAA3098

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