US embassy cable - 05SANAA2556

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 002556 
 
SIPDIS 
 
E.O. 12958: DECL: 09/05/2015 
TAGS: PGOV, EFIN, ECPS, EIND, EINV, ETTC, KMPI, CH, YM, ECON/COM 
SUBJECT: PM BAJAMMAL ON GSM TENDER: IT'S ALL ABOUT THE MONEY 
 
REF: SANAA 2426 
 
Classified By: DCM Nabeel Khoury for reasons 1.4 b and d. 
 
1. (C) Summary.  On September 5, Ambassador discussed the 
status of Yemen's GSM mobile phone tender with PM Bajammal. 
He emphasized the importance of a transparent tendering 
process for attracting American business and for the 
country's overall investment climate.  Bajammal responded 
directly that the ROYG placed the highest importance on 
winning the best price for its tender, clearly indicating his 
preference for the Chinese company Unitel.  International 
operating experience and technical merit will be only minor 
considerations in the High Tendering Committee's final 
decision.  By several accounts, Yemen is facing a severe 
budget shortfall for 2005, and will look to partially fill 
the gap with payment for tender.  The PM deflected discussion 
of official corruption in Yemen, laying the blame on 
low-level officials and private citizens.  End summary. 
 
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Show Me The Money 
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2. (C) On September 5, Ambassador met Prime Minister Bajammal 
to discuss the current mobile phone tender, and Yemen's 
investment climate in general.  Private sector investment is 
the key to Yemen's development, said Ambassador, and a 
tendering process conducted according to international 
standards is critical for attracting world-class companies. 
Ambassador cited mobile phone operator Millicom, one of five 
competing companies in the tender, as one such company.  He 
expressed concern about the unusually high bid of Chinese 
company Unitel (USD 149 million), in light of the fact that 
they have no reputation as an international operator and 
their local partners are relatively unknown. 
 
3. (C) Bajammal responded bluntly that the tender was not 
intended to attract the best company, only to generate the 
most money possible for Yemen's treasury.  We don't need more 
GSM, said Bajammal.  We already have two GSM companies and if 
this one fails, we can always issue another license.  As for 
Unitel's lack of experience, the PM said that neither Sabafon 
nor Spacetel, Yemen's two existing GSM operators, had 
experience when they began. We don't know on what basis the 
Chinese made their bid, continued Bajammal, as the competing 
companies are not required to complete a feasibility study. 
According to the PM, the ROYG removed this requirement from 
investment law in accordance with a recommendation from the 
World Bank. 
 
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Bajammal Gets Philosophical 
--------------------------- 
 
4. (C) Ambassador stressed the importance of complying with 
the tender document issued by the ROYG, which specifies that 
the entire amount must be paid within two weeks of the tender 
award and that the winning company must meet certain 
technical requirements.  The PM assured Ambassador that all 
factors would be considered, but that in the end the highest 
bid would likely win.  If Unitel can't pay the full amount, 
said Bajammal, we'll simply go to the next highest bidder. 
He then quoted French intellectual Andre Malreaux, saying: 
"Reality is the corrected mistake."  As for the investment 
climate, the PM said the ROYG was streamlining bureaucratic 
obstacles and there would be many more opportunities for 
American companies to compete. 
 
5. (C) On the issue of corruption, Bajammal contended that 
the bulk of the problem can be found between low-level 
officials and private citizens, not within the ROYG itself. 
He theorized that much of the problem stems from the merging 
of incompatible legal systems from the former regimes of 
North and South Yemen.  "The people are united already," said 
Bajammal, "but the law isn't."  (Note:  Bajammal hails from 
the Hadramawt region, located in the former South Yemen. End 
note).  Ambassador agreed with the need to strengthen state 
institutions, especially the creation of an independent 
judicial branch.  He further noted that this will be a key 
component of Yemen's MCC Threshold proposal, to be submitted 
by the end of September. 
 
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Fiscal Crisis Will Determine GSM Winner 
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6. (C) Comment:  Bajammal's exclusive emphasis on the 
monetary value of the Chinese bid matched earlier comments 
made to Ambassador in meetings with Minister of Finance 
Salami and Minister of Telecommunications al-Moalimi. 
(reftel)  Yemen is facing a severe shortfall in its 2005 
budget, and the MOF is pressuring all ministries to locate 
new revenue sources.  As a result, the ROYG is interpreting 
the GSM tendering document to include under-qualified bidders 
who would otherwise be disqualified.  Among the finalists, 
overwhelming preference will be given to the highest bid, 
nearly guaranteeing that Unitel will win the tender.  This is 
ultimately to the detriment of Yemeni consumers, denying them 
the benefits of increased competition, improved telecom 
infrastructure, and quality service.  Nevertheless, the 
short-term budgetary fix is too attractive for the ROYG to 
pass up.  It remains to be seen, however, if the Chinese will 
pay the full USD 149 million within the required period, or 
whether creative financing will further compromise the 
integrity of the tendering process.  End comment. 
Krajeski