US embassy cable - 03SANAA595

UNCLAS SECTION 01 OF 02 SANAA 000595 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, PGOV, EAID, PINR, YM, WTRO, ECON/COM 
SUBJECT: YEMEN'S ECONOMY AS SEEN BY WORLD BANK ECONOMISTS 
 
1. Sensitive But Unclassified, please protect. 
 
 2. (SBU) Summary: Two World Bank economists in Sanaa are 
complimentary about the ROYG's fiscal policy and commitment 
to reforms. In a March 17 discussion with Emboffs, the bank 
economists gave positive assessments of Yemeni fiscal 
discipline, currency management and WTO prospects. End 
Summary. 
 
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Fiscal Policy 
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3. (SBU) World Bank Senior Economist for Yemen Nadir A. 
Mohammed (please protect throughout) and Economist Mohammed 
Al-Sabbry both have positive forecasts for the Yemeni economy 
despite Yemen's per capita income of $460 USG, literacy rates 
of 56 %, and prospects for oil revenues dwindling in the next 
five years.  Nadir said that while they have a huge 
challenge, the Yemenis are on the right track.  Citing five 
billion dollars in foreign reserves, he said the ROYG 
compared favorably to other countries that have spent their 
recently increased oil revenue less wisely. (Note: Yemen 
Central Bank Figures for February report 4.75 Billion USG in 
Reserves. End Note.) Mohammed said that he was impressed with 
the frankness and openness of his Yemeni contacts, and felt 
that the ROYG's fiscal policy was sound.  He said that the 
ROYG appears to have learned lessons from 1991 (the first 
Gulf War), and 1994 (the abortive rebellion in the South). 
 
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Currency 
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4. (U) Nadir also praised the ROYG Central Bank for holding 
firm on its decision to float the riyal.  Nadir's point was 
confirmed when on March 19 Pol/Econoff visited Omar S. 
Bazara, the Payment Systems Director of the Yemeni Central 
Bank. He reported that the Central Bank was selling dollars 
to keep the riyal from slipping further on the dollar as a 
result of worries about an attack on Iraq. For the last 
month, the riyal had held firm at 182 riyals to the USG 
dollar, but yesterday the rate had increased to 183 Yemeni 
riyals to the dollar. One of our FSNs reported that same day 
that the black market rate had risen to 186 riyals to the 
dollar. 
 
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Yemen's Bid to Join the World Trade Organization 
--------------------------------------------- -- 
 
5. (U) Mohammed was optimistic on the ROYG's prospects for a 
faster than average accession to the World Trade 
Organization. He estimated that it could take four to five 
years, less than the average seven to eight years, because 
Yemen's neighbors and others are unlikely to press strong 
objections to Yemen's candidacy. (Background: In October 
2002, Yemen submitted its Memorandum on Foreign Trade Regime 
to the World Trade Organization. End Background.) 
 
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Fishing Rights 
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6. (U) Mohammed Al-Sabbry said that the Bank was closely 
following USG efforts to improve the capacity of the Yemeni 
Coast Guard and Navy because the illegal harvesting of fish 
has adversely affected the Yemeni fishing industry. 
Specifically, Chinese fishermen take their boats to the Red 
Sea to harvest and process their fish.  According to Nadir 
Mohammed, the Chinese obtain licenses for a lower amount of 
fish, then through bribery of unnamed Yemeni officials, 
vastly exceed their allotment. Fishermen from Egypt, Eritrea 
and Ethiopia also have been over-fishing in Yemeni 
territorial waters.  Al-Sabbry said that Bank experts are 
worried that if Yemen promotes fish exports too heavily, the 
waters might be over fished, damaging a potentially lucrative 
resource for the ROYG. Thus, any effort to improve the 
ability of the ROYG to protect their fishing rights will have 
a direct impact on the local economy. 
 
 
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Boycott on US/Israeli Products 
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7. (U) Pol/Econ Chief noticed a sticker pasted onto the front 
door of the Jordanian owned restaurant calling for a boycott 
of American and Israeli products. He wondered aloud in the 
owner's presence why the sticker was so prominently 
displayed.  After the meal, Pol/Econ chief noticed that the 
sign had been removed. However, other contacts report mixed 
results for the boycott of US and Israeli goods. The local 
Pepsi distributor told one of our FSNs that he had seen only 
a 10% decline in business in 2002, noting that this decrease 
was much less than Pepsi had felt in other countries. A 
colleague at the British Embassy related a story about taking 
a delegation of nine British security officials to do some 
shopping at a store where a boycott sign was displayed. The 
team made the removal of the sign a condition of doing 
business with the store, but the owner refused to comply and 
the team went elsewhere. 
 
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Bio Note 
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8. (SBU) Nadir Mohammed said that he was born in the Sudan, 
and received his doctorate in Economics from Cambridge 
University where he also completed his post doctoral studies 
and did some teaching. He has worked at the Islamic 
Development Bank in Washington, and has held jobs with the 
World Bank in Morocco, Ethiopia and Egypt. He expects to 
leave Yemen in the coming year and said he would like an 
assignment in Southeast Asia. 
HULL