US embassy cable - 05SANAA2922

S E C R E T SANAA 002922 
 
SIPDIS 
 
FOR U/S BURNS FROM AMBASSADOR KRAJESKI; PLEASE PASS TO NEA 
FOR A/S WELCH; USAID FOR BRENT; MCC FOR A/CEO SETHNESS; 
TREASURY FOR FRANCO 
 
E.O. 12958: DECL: 10/05/2015 
TAGS: ECPS, EFIN, EIND, EINV, PGOV, KMCA, KMPI, YM, ECON/COM 
SUBJECT: MCC ESSENTIAL TO STABILITY AND REFORM IN YEMEN 
 
Classified By: Ambassador Thomas C. Krajeski for reasons 1.4 (b) and (d 
). 
 
1. (S) Summary:  Millennium Challenge Corporation programs 
are crucial to Yemen's future and to U.S. national security 
interests. Yemen stands at an important crossroads in its 
path to development and reform.  For Yemen's reformers, MCC 
offers an important way forward.  If the United States walks 
away from these champions, it will pave the way towards 
economic and political collapse.  Failure for the Yemeni 
state would undermine security on the Arabian Peninsula, 
provide a haven for transnational terrorists, and provide a 
ready pool of recruits for extremist movements.  End summary. 
 
2. (S) After unification in 1990, the ROYG took serious steps 
to expand democratic freedoms, liberalize the economy, and 
improve the welfare of its citizens.  Yemen held multi-party 
elections at all levels of government, allowed for 
independent print media, and partially adopted a World 
Bank/IMF program of fiscal responsibility and market 
liberalization. In more recent years, however, internal 
politics and the spread of corruption have delayed further 
advances, and in some cases progress has even been reversed. 
Journalists often face serious harassment for challenging 
government policy; the ROYG has delayed for four years 
implementation of necessary economic reforms; and falling 
immunization rates have opened the door to the spread of 
polio and other diseases.  These are serious problems, many 
of which are reflected in the most recent MCC indicator 
scores. 
 
3. (S) Post is working with a core group of committed 
reformers within the ROYG.  These forward-looking officials 
face formidable challenges in transforming their government 
and creating opportunities for their fellow citizens.  In 
2005, the reformers demonstrated their ability to overcome 
resistance from entrenched interests and deliver necessary 
policy changes.  In July, the ROYG partially lifted fuel 
subsidies in accordance with the recommendations of the 
WB/IMF, recuperating much needed revenue.  The ROYG is 
actively pursuing trade reform, and is enacting customs and 
tariff legislation to comply with the rules of the WTO. 
Parliament has shown an increasing willingness to address 
official corruption and to demand accountability. 
 
4. (S) Many of Yemen's key reformers have pinned their 
reputations on the MCC.  In developing a Threshold Program 
proposal for MCC, ROYG reformers obtained official 
endorsement from the President and Cabinet.  In a written 
document, the ROYG took the important step of admitting 
serious deficiencies in rule of law and the administration of 
justice, specifically addressing the need to combat 
corruption, and asked the USG for assistance.  This 
unprecedented approach has generated considerable interest 
outside ROYG ministries as well.  Members of Parliament are 
requesting that post educate them further on the MCA process 
and how they can help improve Yemen's prospects. 
 
5. (S) In the face of serious challenges in ruling justly, 
investing in people, and advancing economic freedom, Yemen is 
looking to make the right choices in a crucial period of 
transition.  If reformers can manage to carry the day and 
implement necessary changes, Yemen has the potential to join 
the family of economically viable democratic nations.  If 
they fail, Yemen may become a failed state, endangering its 
neighbors and fueling extremism.  It is therefore important 
to U.S. national security that we remain committed to the MCC 
process in Yemen at this time, and approve Yemen's MCC 
Threshold operational plan.  The process may prove difficult, 
requiring an extended Threshold period before full admittance 
to the MCA, but post believes that, considering the 
alternatives, this will prove a worthwhile investment. 
Krajeski