US embassy cable - 05SANAA265

UNCLAS SANAA 000265 
 
SIPDIS 
 
DEPT PASS TO AID FOR PPC/MCA S. BRENT 
 
E.O. 12958: N/A 
TAGS: ECPS, EFIN, EIND, EINV, KMCA, KMPI, PGOV, YM, ECON/COM, DEMOCRATIC REFORM 
SUBJECT: YEMEN SUBMITS THRESHOLD PAPER: REACHING MCC A 
JOURNEY OF A THOUSAND STEPS 
 
REF: A. SANAA 193 
     B. SANAA 9 
 
1. Summary. Deputy Prime Minister Sofan presented Yemen's 
MCC-Threshold Concept Paper to USAID Director on Jan. 30. 
The paper was recommended for approval on Jan. 30 by letter 
to AID/PPC/MCA, signed by Ambassador and USAID Director.  The 
Ministry of Planning and International Cooperation (MOPIC) 
had the lead in developing the paper (ref A), which aims to 
address Yemen's status as measured by MCC indicators.  To be 
accepted into the Threshold Program, the ROYG was required to 
explain its underperformance in several categories, and to 
offer a coherent plan for improving these scores within two 
years.  If MCC accepts the Concept Paper, the next step is 
for the ROYG to submit specific project proposals for 
funding, which could potentially exceed ten million dollars 
over two years.  The ROYG,s performance in meeting these 
goals will reveal its willingness to make the hard choices 
required of a true leader of reform and partner for change in 
the region. End summary. 
 
2. MOPIC designed its concept paper using improvement of the 
investment climate as its binding theme.  The ROYG contends 
that increasing and diversifying investment in Yemen is 
essential to raising MCC indicator scores across the board. 
This approach strayed from US recommendations that MOPIC 
focus on the crosscutting indicators, corruption and 
rule-of-law.  Nevertheless, the ROYG acknowledged the 
importance of these two indicators as elements of the 
investment climate, along with proposing steps to secure 
property rights. 
 
3. Post endorses the Concept Paper for its direct approach in 
identifying key issues and the ROYG's apparent willingness to 
mobilize the interagency process to tackle ROYG failures in 
key MCC indicators.  That the paper explicitly acknowledges 
the problem of "patronage and nepotism" within the ROYG, 
along with stating "the need for serious and concerted 
efforts" to fight corruption, is a noteworthy step in and of 
itself.  The paper also specifically points to breakdowns in 
the civil service, the court system, and the public 
procurement process. 
 
4. Despite the positive signs, there remains good cause for 
skepticism as to the ability of ROYG Ministries to implement 
reform, most importantly concerning President Saleh,s 
resolve to implement the tough decisions regarding democratic 
and economic reform that will guarantee MCC qualification. 
Ambassador made clear to Sofan during the visit of MCC 
officials to Yemen that achieving MCC status would require 
implementing reform measures that "caused pain" to those 
living off institutionalized corruption.  The measures 
proposed in the ROYG,s Concept Paper, however, demonstrate 
an approach that seeks to tackle corruption via small steps. 
For example, to reduce corruption, the paper proposes an 
indirect approach -- improving the free media and 
strengthening the monitoring role of Parliament.  To promote 
the indedendence of commercial courts and the High Committee 
for Tenders, the paper requests technical support and 
training.  There is no mention of law enforcement or 
prosecution of corrupt officials. 
 
5. Comment: The fact that reform-minded MOPIC officials were 
able to exploit the Threshold process to mobilize an 
inter-departmental committee to address MCC indicators and to 
push for internal reform is a valuable outcome.  While the 
Concept Paper is a satisfactory start for future work within 
the Threshold Program, post will examine future proposals for 
specificity of reform and institutional change in the 
implementation design.  Post will hold the ROYG's feet to the 
fire over the next two  Threshold years,, looking for 
tangible improvements in such areas as the tendering process, 
press freedoms, and transparency in government finance.  We 
will continue to stress that Threshold is not a success in 
its own right, but will serve as a litmus test for future 
development assistance. End comment. 
Krajeski