US embassy cable - 03SANAA678

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000678 
 
SIPDIS 
 
E.O. 12958: DECL: 04/01/2008 
TAGS: ECON, PGOV, EFIN, PINR, YM, ECON/COM 
SUBJECT: PROMINENT OPPOSITION BUSINESSMAN'S VIEWS ON ROYG 
ECONOMY 
 
 
Classified By: Classified by CDA Alan G. Misenheimer for 
reasons 1.5 B. and D. 
 
1. (C) Summary: A prominent businessman believes civil 
service reform is the most important change that the Yemeni 
government must make to stem corruption.  According to Islah 
party member and leading banking figure Mahfoodh Salem 
Shammakh, attempts by the government, World Bank and other 
lending agencies to reform the civil service have yet to 
force the ROYG to take tough decisions such as laying off 
workers and raising salaries. Shammakh also offered his views 
on Yemeni education and the effects of qat on the economy. 
End Summary 
 
2. (C) Mahfoodh Salem Shammakh, Director of Shammakh and 
Company, cofounder of the Yemeni Commercial Bank, and 
prominent Islah Party moderate, outlined his ideas for 
reforming the Yemeni economy, including civil service reform, 
education overhaul, and land use reform. Shammakh is from 
Hadrawmaut, educated in Aden and a member of several economic 
committees, including the Ministry of Industry and Trade's 
World Trade Organization accession advisory committee and the 
Sanaa Chamber of Commerce. 
 
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Laws Help, but Civil Service Reform is Real Solution 
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3. (C)  Shammakh supported passage of the anti-money 
laundering law by the Yemeni parliament, while acknowledging 
that his own accounting procedures may become more 
complicated. Shammakh explained that his sugar business 
suffered when a Lebanese merchant sold sugar in Yemen at 
below market price, but accounted for the sugar at the 
regular price, effectively laundering his money and harming 
Shammakh's own sugar sales. Shammakh said acts like this may 
be curtailed by the law, and his businesses may do better. 
 
4. (C) Shammakh concluded saying, "the law will never be 
implemented." Shammakh contended that tribes make too much 
money smuggling drugs and antiquities to allow for effective 
implementation.  He claimed that many of the tribes were 
smuggling Jewish texts out of the country, and in one 
instance a dealer in Singapore was willing to pay 15 million 
USD (sic) for a piece of ancient Hebrew scripture.  For the 
tribes, this was too much money to forego and after a few 
attempts to enforce the law, the government, he believes, 
will lose interest in enforcement. Corruption by individuals 
in the government, he added, could be stopped, but civil 
service reform was the only solution. 
 
5. (C) Citing his experience with corruption he said, "I'm a 
merchant, and I know what things cost. None of the Ministers 
could afford my refrigerators on their salaries, but they all 
have them."  Shammakh continued by detailing the financial 
requirements of a high official, and concluded that there was 
no way a senior official could even afford food on the salary 
provided by the Ministry.  The first step for reform is to 
trim the bloated ROYG workforce and the second step is to 
adequately compensate the workers the ROYG is able to keep. 
Admitting this may be a painful and long process, Shammakh 
said it was the most important factor in ending corruption in 
Yemen. 
 
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Ill-prepared Workers 
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6. (C) Turning to other problems of doing business in Yemen, 
he said, "I cannot find a secretary to hire." Complaining 
that the Yemeni education system focuses too much on 
impractical knowledge and little on career based education, 
he said he and his colleagues found it extremely difficult to 
find qualified people.  He said to counter this, the Islah 
Party founded the Islahi Technical College to train students 
in computer and job skills. To his disappointment, the 
college has since become a university focused on producing 
engineers and has strayed from its original purpose of 
teaching job skills appropriate for the labor market in 
Yemen. 
 
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Qat: the "Evil of Evils" 
----------------------- 
 
7. (C)  Qat, Shammakh said, was "the evil of evils."  He 
blamed many Yemeni economic problems on Qat and the inability 
of the Ministry of Agriculture to encourage the growth of 
alternative crops. He said farmers needed micro-enterprise 
projects, and not long-term studies.  Qat was taking valuable 
land and water that could be used for cash crops.  Shammakh 
owns a tannery and said he was unable to get suitable hides 
in Yemen because people kill their cows too young. Blaming 
this also on qat, he said that people would rather grow qat 
than use the land to graze cattle or grow coffee or ginseng, 
all profitable commodities for Yemen.  Shammakh himself left 
the coffee business because he was unable find land to grow 
enough beans to make production profitable. 
 
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Comment 
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8. (C) Comment: Shammakh focused his strong critique of the 
ROYG on the ministries themselves, and never once mentioned 
the Presidency. We have been reliably told that that 
President Saleh had asked Shammakh to join the ruling GPC, 
but that Shammakh told the President that he needed to stay 
in the Islah Party to keep it moderate.  Shammakh politely 
answered all of Pol/Econoff's questions on money laundering, 
but took every opportunity to provide his own views on what 
ails the Yemeni economy. End Comment. 
 
MISENHEIMER