US embassy cable - 05SANAA1833

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 001833 
 
SIPDIS 
 
CAIRO - PASS TO ATO/ASIF CHAUDHRY. USDA FAS WASHINGTON - 
PASS TO KATRINA REID. 
 
E.O. 12958: DECL: 07/03/2015 
TAGS: ECON, ECIN, EAID, YM, ECON/COM 
SUBJECT: DPM SOFAN ON CORRUPTION, USDA FOOD AID, AND 
MILLENIUM CHALLENGE PROGRAM 
 
1. (SBU) Summary: CDA Nabeel Khoury met with Deputy Prime 
Minister and Minister of Planning and International 
Cooperation, Ahmed Sofan, on July 2 to discuss USDA food aid 
program implementation, corruption, and Yemen's Millenium 
Challenge Account (MCA) Threshold plans.  Sofan agreed with 
the DCM that the recent tendering of USDA food aid 
commodities was not conducted in an open and transparent 
manner and promised to fix the mistake.  On the Business Plan 
for Yemen's MCA Threshold program, Sofan agreed to 
reinstitute corruption in the ROYG's MCA business plan either 
as a stand-alone program or a cross-cutting issue with 
specific steps in mind.  End summary. 
 
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Issue of Corruption in the MCC Plan: Where Did it Go? 
--------------------------------------------- -------- 
 
2. (SBU) In the ROYG's MCA Threshold concept paper, the ROYG 
stated that the issue of corruption would be a main focus of 
the Threshold implementation plan.  However, in early drafts 
of the implementation plan, corruption was not included as 
one of the chosen foci.  CDA Khoury communicated to Sofan 
that the issue of corruption was central, in our view, to any 
serious reform in Yemen and that the MCC presented an 
opportunity for a realistic program to fight corruption -- an 
opportunity that should not be missed.  Sofan said he was 
surprised that corruption had somehow been dropped from the 
wrok plan and agreed that it should be featured prominently. 
Sofan did, however, suggest a "delicate" phrasing of an 
anti-corruption campaign in order not to "offend anyone." 
CDA encouraged Sofan to cooperate fully with the USAID-funded 
anti-corruption experts to fashion a long-term plan for 
combatting corruption.  (NOTE: Ministry of Planning and 
International Cooperation (MOPIC) requested technical 
assistance for MCA programs and the US has sent the two 
currently visiting USAID-funded anti-corruption, democracy, 
and good governance experts to assist MOPIC.  End note). 
 
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MOPIC Dragging Heels: The Marib Museum 
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3. (SBU) CDA raised the issue of the Marib Museum project, 
which was agreed on in 2003 as one of the projects to be 
funded by proceeds from the USDA food aid program.  In a June 
22 letter to Sofan, CDA requested that MOPIC transfer funds 
to third-party government agencies in a timely and expedient 
manner, starting with the Marib Museum project.  The 
memorandum of understanding (MOU) for this $3 million project 
was signed by Sofan and former Ambassador Hull on March 17, 
2004.  Despite clear and specific 2-week fund transfer 
requirements outlined in the MOU, MOPIC still had not 
transferred funds to the implementing agency, the Social Fund 
for Development (SFD).  Sofan agreed saying, "Let's wrap up 
the books on these old projects." 
 
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FY-05 PL-480 Tender: Not Kosher! 
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4. (SBU) The FY-2005 PL-480 agreement for USDA food aid has 
yet to be signed between the ROYG and USDA Washington. 
Nevertheless, the ROYG tendered, sold and selected a winning 
bidder two-weeks ago without an agreement on said 
commodities. 
 
5. (SBU) In addition, the ROYG carried out negotiations after 
the opening of the bids.  (NOTE: Such practices are red flags 
for potential corrupt practices and side deals. End note.) 
In response, Ambassador Krajeski sent a letter to Sofan 
outlining Embassy objections.  USDA temporarily halted the FY 
2005 food aid process pending further investigation and 
clarification of the matter.  In his meeting with CDA, Sofan 
agreed that any negotiations conducted after the opening of 
the bids do not adhere to international standards of 
tendering.  He ordered another tender but warned CDA that the 
prices garnered may be lower than the first invalid tender. 
 
6. (C) Comment and Action Request: The pre-emptive tender of 
FY-2005 PL-480 commodities did not meet international 
standards of transparency and violated the spirit of an open 
and competitive bidding process required in USDA-ROYG food 
aid agreements.  In addition, Deputy Finance Minister 
Al-Nahari leveled accusations of collusion amongst the bulk 
distributors at a June 15 meeting with Emboff.  The improper 
procedure followed by MOPIC officially raises suspicions of 
collusion with these distributors to fix prices in exchange 
for kickbacks.  MOPIC may have been embarrassed by Embassy 
attention to suspicious activities and the temporary halting 
of the FY-2005 food aid process.  Sofan's comments about 
lower than previous bid prices represent a subtle threat that 
greater attention to international standards may result in 
less aid to the Yemeni people.  Having obtained an apology of 
sorts and a promise to do things by the book, we are ready to 
recommend to USDA the signing of the FY 2005 food aid 
agreement.  We promise, in our turn, to carefully monitor the 
process and report our observations to Washington.  End 
Comment. 
Khoury