US embassy cable - 04SANAA3151

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 003151 
 
SIPDIS 
 
E.O. 12958: DECL: 12/19/2014 
TAGS: ECON, PGOV, KMPI, KCOR, YM, KMCC, ECON/COM 
SUBJECT: ROYG MAKING TENTATIVE STEPS TO STEM CORRUPTION AND 
PROMOTE ECONOMIC REFORM 
 
REF: SANAA 2521 
 
Classified By: Ambassador Thomas C. Krajeski for reasons 1.4 (b. and d. 
) 
 
1. (C) A recent series of local press articles may signal 
that the ROYG is finally taking initial steps to address 
corruption, particularly in the area of diesel smuggling, one 
of the main reasons Parliament was able to successfully stall 
implementation of an economic reform package.  In a meeting 
to determine Yemen's MCA threshold proposal, Anti-Corruption 
Committee point man Ali al-Anisi affirmed that fighting 
corruption is a top priority for the ROYG. In September, 
(reftel) Parliament (with the blessing of the President) 
voted down a series of cost cutting and revenue enhancing 
measures, saying that until the executive did more to address 
administrative abuses and corruption, the reforms would not 
pass.  Parliament is now debating the 2005 budget, which has 
attached to it the pending economic reforms.  The reform 
package includes reducing diesel subsidies, and instituting a 
general sales tax and civil service reform. 
 
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Saleh Forms New Anti-Corruption Committees 
------------------------------------------ 
 
2. (SBU) Press reports have focused on a move by President 
Saleh to form two investigative committees to look at the 
issues of oil smuggling and over-staffing at the Ministry of 
Education.  The committee investigating the oil subsidies 
will be composed of members from Parliament's Oil Committee 
(responsible for this past year's corruption investigation on 
block 53) and members of the Central Organization for Control 
and Audit. An article in the government daily "al-Thawra" 
specified companies to be investigated.  Deputy Foreign 
Minister Noman told Pol/Econ Chief that all contracts with 
the companies in question have been canceled until the 
investigation is completed.  (Background: One of the 
arguments in favor of reducing the subsidy is that diesel 
fuel is smuggled to neighboring countries and sold for 
profit.  Most of smugglers are affiliated with the military 
and benefit from the subsidies.) 
 
3. (SBU) The second committee will address a controversial 
and public problem, over staffing at Ministry of Education. 
It is rumored that as many as 50 percent of people who 
collect salaries from the Ministry of Education do not 
actually report to work. 
 
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Press Supports Reform 
--------------------- 
 
4. (SBU) On December 12 "al-Thawra" ran a front-page 
commentary noting that diesel subsidies cost the ROYG 670 
million USD a year.  "Those who were against the reforms are 
corrupt and benefit from the low diesel prices," the article 
criticized, accusing politicians who oppose reducing oil 
subsidies for "not assuming and responsibility for the 
national interest." (Note: The 2005 ROYG Budget is about 4.5 
billion USD, the amount in diesel subsidies is in excess of 
what the government spends on healthcare and education 
combined.  End Note). 
 
5. (SBU) Deputy Minister of Planning Mohammed al-Sabry told 
Pol/Econ Deputy he was pleased at the "strong words" of this 
article and believed it indicated increased attention to 
promoting reforms.  Sabry himself penned an article that 
appeared in the paper "Jaridat al-Nas," affiliated with the 
opposition party Islah, saying that the "doses", as the 
economic reforms are commonly referred to, will not affect 
the people.  Sabray analyzed the effect on the poor, and 
concluded that while inflation will grow, more money will be 
used for development.  Sabry said that his article was the 
first in a series that will directly address the concerns of 
the average citizen over the effects of the economic reform 
package. 
 
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Anisi Says Saleh Personally Involved With Issue 
--------------------------------------------- -- 
 
6. (C) To demonstrate the ROYG's commitment to 
anti-corruption measures, Deputy Prime Minister Sofan 
arranged for Ambassador and visiting MCA Threshold Program 
representative to meet with Director of the Presidential 
Office and Deputy Director of the Supreme Committee for 
Combating Corruption Anisi 12/20.  Prime Minister Ba Jammal 
heads the Supreme Committee.  Anisi affirmed Yemen's 
committment to fighting corruption and produced a German 
financed study outlining measures the ROYG has to enforce its 
existing anti-corruption laws.  Anisi said President Saleh is 
personally involved with anti-corruption measures and that 
the government understands the issue.  To close, Anisi 
claimed that Yemen wants to take a leadership role in 
fighting terrorism, promoting democratic reform and fighting 
corruption.  (Note: Anisi's committee is openly derided among 
most Yemenis as worthless, and he is known to be one of the 
more corrupt members of Saleh's inner circle.   End note.) 
 
7. (C) Comment: Embassy contacts are pointing to these 
initial steps with pleasure, but note healthy skepticism at 
what might be achieved.  Anisi's committee has done nothing 
in the past two years to actually stem the rising tide of 
corruption.  It is significant to note that for the first 
time a Deputy Minister is appearing on the front lines 
advocating for economic reform.  Until a Minister or the 
President directly appeals for these changes, however, we too 
remain skeptical about how much impact this new public 
campaign will have on reforms.  Nevertheless, high level 
bureaucrats have taken up the call to promote reforms, and 
the President's establishment of two committees to 
investigate corruption are both important steps.  Post will 
continue to encourage follow-through on these initiatives and 
push for additional concrete steps to address corruption, 
which is crucial as Yemen aims for MCC status in 2006.  End 
Comment. 
KRAJESKI