US embassy cable - 05SANAA612

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000612 
 
SIPDIS 
 
STATE PLEASE PASS TO MCC 
 
E.O. 12958: DECL: 03/13/2015 
TAGS: KCOR, PGOV, ECON, YM, KMCC, ECON/COM 
SUBJECT: FINANCE MINISTER SALAMI PUTS A GOOD SPIN ON HIS 
COMMITMENT TO REFORM 
 
REF: SANAA 328 
 
Classified By: Amb. Thomas Krajeski for reasons 1.4 (b. and d.) 
 
1. (C) Summary and comment: In a cordial and open meeting on 
March 13 with Deputy Prime Minister and Minister of Finance 
Alawi al-Salami, Ambassador highlighted U.S. efforts to 
support decentralization, urged the ROYG to take serious 
anti-corruption and transparency efforts and encouraged Yemen 
to take concrete steps to improve its investment climate. 
Salami was quick to assure the Ambassador he and his Ministry 
are ready and willing to support USG goals.  Characterizing 
himself as a reformer, Salami has placed himself on the side 
of Ba Jammal -- behind the government's reform plans, but he 
is still in the sites of a skeptical parliamentary 
opposition, which reportedly continues to talk of unseating 
both men. (Reftel).  End summary and comment. 
 
---------------------------------- 
Decentralization: We're putting a 
Finance Office in Every District 
---------------------------------- 
 
2. (C) Claiming that the Ministry of Finance has been a keen 
supporter of decentralization since the enactment of the 2001 
local council law, Salami said his ministry is training local 
council officials to better manage budgets.  Salami explained 
that while the local council law compares favorably to those 
of their Arab neighbors, Yemen's implementation and 
enforcement should be enhanced.  A new plan to manage local 
government expenditures, he noted, will be completed shortly. 
 In defense of his ministry, Salami said that local councils 
have not been aggressive enough in pursuing their own sources 
of income and rely too heavily on disbursement from central 
authorities.  According to Salami, the central budget has not 
been expanded to provide local councils with additional 
resources.  Salami further complained that the Ministry of 
Finance now staffs accounting offices in every district to 
handle its new funding mandate.  But, he explained, he 
authorized and funded the expansion to support 
decentralization goals.  (Comment: The Ministry of Finance's 
expanded presence through new offices to control local 
council budget disbursement is widely considered an effort to 
assert control over the councils and therefore, a setback to 
decentralization.  End comment.) 
 
 
--------------------------------------------- ------ 
Ministry of Finance Leads (Anti)-Corruption Efforts 
--------------------------------------------- ------ 
 
3. (C) Salami affirmed the ROYG's commitment to fighting 
corruption, adding that it was he who signed the UN 
Convention on Anti-Corruption.  Salami said the cabinet 
approved the convention, and it is now before Parliament, 
along with a letter from him urging its immediate passage. 
(Comment: Post has seen little evidence of a "push" to ratify 
the convention.  End comment).  Ambassador underscored that 
Yemen must take, as part of its MCC Threshold program 
proposal, concrete, tangible steps to fight corruption and 
improve transparency.  Salami said that studies have proven 
that Yemen has sound laws governing tendering, but lacks the 
ability to implement regulations and follow the procedures. 
Salami announced that a two-year study authored by Crown 
Agents on the ROYG's tendering procedures will be published 
soon.  The MOF plans to adopt the recommended steps to 
improve its tendering process. 
 
------------------------------- 
Financial Infrastructure Reform 
------------------------------- 
 
4. (C) In a likely bid to stave off a message on the need for 
improved fiscal accountability, the DPM volunteered that he 
and his Ministry were working with the Dutch and the World 
Bank to design a workshop focusing on ways to improve Yemen's 
budget classification system.  (Note: Due in large part to 
inaction by the MOF, attempts to improve Yemen's fiscal 
accounting have languished for five years. Thom Sprenger, of 
the Dutch Embassy, told Pol/Econ Deputy that MOF's agreement 
to hold the workshop constituted a major victory for the 
World Bank and indicates Salami might be yielding to donor 
pressure.  End note).  Salami quickly agreed with 
Ambassador's point that the Central Bank of Yemen (CBY) 
should wean itself away from commercial business, but 
contended that until his ministry can operate more like a 
treasury department, the CBY must continue to perform 
commercial bank functions.  Salami said his eventual goal was 
the creation of necessary financial infrastructure for Yemen 
to have a stock market, but noted that they still had to 
improve the banking system and the transparency of Yemen's 
private sector. (Note: The stock market is a pet project of 
the Ministry, even though most experts believe it will be 
years, if ever, before Yemen is ready for advanced financial 
systems. End note). 
 
------------------------ 
Three Bids for Aden Port 
------------------------ 
 
5. (C) Ambassador raised concerns over the soundness of the 
Aden Port Tender. Acknowledging "interference in the 
process," Salami announced that only three companies 
submitted final bids for the Aden Port Management: Kuwait and 
Gulf League Co., Manila based, ECTS and Dubai Ports 
International.  Deputy Finance Minister, Ahmed Ghalib, added 
that the decision could come as early as the week of March 
19.  Salami confirmed that World Bank and Dutch advisors were 
involved in the tendering process to assure international 
investors that the process is sound. Salami pointed to Post's 
updated Investment Climate Statement that was recently 
received negatively by some Yemeni officials in the press, "I 
am not criticizing it. I agree completely," he said. Salami 
closed the meeting saying Yemen's future lay with the private 
sector and agreed that Yemen must continue to improve its 
investment climate. 
 
-------- 
Comment: 
-------- 
 
6. (C) Comment:  Salami was in rare form, laughing, nodding 
and smiling at the Ambassador, as opposed to his normal, 
stoic self.  By agreeing to fire close and disliked aides 
(Reftel), Salami may have weathered another political battle. 
 Salami is a survivor and may have ceded just enough control 
to maintain his very powerful position.  Salami's ability to 
frustrate everyone from World Bank officials to Yemeni 
Ministers, however, could still lead to his ouster.  Liberal 
minded Yemenis scoff at Salami's painting himself as a 
crusader against corruption and point to his extravagant 
houses as proof of malfeasance.  Yet, any serious 
anti-corruption effort must work with the Ministry of Finance 
and Post will seek to capitalize on his willingness to work 
with us, for now.  End comment. 
Krajeski