This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 SANAA 000037 
 
SIPDIS 
 
E.O. 12958: DECL: 01/03/2115 
TAGS: PGOV KCOR KMCA KMPI YM ECON COM DEMOCRATIC REFORM
SUBJECT: ECONOMIC REFORM PART DEUX: ROYG MAKING LIMITED 
CONCESSIONS TO PARLIAMENT 
 
 
Classified By: CDA Nabeel Khoury for reasons 1.4 (b. and d.) 
 
¶1. (C) Summary. During a rancorous Parliamentary session on 
December 26, Prime Minister Ba Jammal's bodyguards ushered 
him out of the building while he was trying to give a speech 
promoting the government's 2005 budget. Attached to the 
budget are much needed economic reforms including reduction 
of the diesel subsidy, implementation of a general sales tax, 
and amendments to the customs and general investment laws. 
After what newspapers are calling an "attack," Parliament was 
shut down for two days before reconvening the contentious 
budget debate December 29.  Also on December 29, President 
Saleh announced judicial reforms that may well signal his 
first attempt to respond to Parliamentary demands that the 
executive get serious about addressing corruption. End 
summary. 
 
--------------------------------------------- ------------ 
Ba Jammal Returns -- Ousted Again -- Parliament Shut Down 
--------------------------------------------- ------------ 
 
¶2. (SBU) On December 26, Prime Minister Ba Jammal made a 
second attempt at defending economic reforms, now attached to 
the ROYG's 5 Billion USD 2005 budget plan.  Ba Jammal's 
bodyguards, sensing a physical threat, swiftly removed the 
widely unpopular PM from Parliament.  In violation of 
constitutional law, Parliament was shut down for two days and 
several MPs staged sit-ins in front of the building. 
Parliament reopened on December 29.  (Note: In September he 
was also whisked out of Parliament under threat of violence 
while advocating for the reforms package, at that time being 
considered separately from the budget proposal.  End note). 
 
¶3. (SBU) According to several contacts close to Parliament, 
on the day of the ruckus, many MPs raised conditions for 
approving the budget, including calling on the executive to 
fully implement the Local Councils Law.  (Note: In effect, 
this would mean that fifty percent of national investment 
budget would be obligated to local councils in 2005 as 
opposed to the current 11 percent.  Many councils scarcely 
receive any budget and several, including in the Marib 
governorate, have never met. End note).  Other 
Parliamentarians demanded amendments to the budget to limit 
the power of the Ministry of Finance to disburse funds, and 
anti-corruption amendments to the tendering law. 
 
-------------------------------- 
Saleh Announces Judicial Reforms 
-------------------------------- 
 
¶4. (SBU) In a December 29 speech to the higher judicial 
council, Saleh announced judicial reforms including the 
dismissal of 22 judges for misconduct and the retirement of 
108 elderly judges.  Saleh sent eight judges to the so called 
"accountability council" for misconduct, and added several 
new undersecretaries to the Ministry of Justice.  The 
Judicial Inspection Commission was also granted increased 
staffing and funding to enhance its oversight capabilities. 
State run press referred to these changes as "sweeping." 
 
------------------------------- 
Rumors of Riots and Price Hikes 
------------------------------- 
 
¶5. (C) Sanaa this past week was riddled with rumors that the 
government is raising prices on all foodstuffs, diesel prices 
will double overnight and mass demonstrations will occur 
downtown.  The Joint Meeting Party, a coalition of eight 
opposition parties, announced their objection to the "doses," 
and called on Yemenis to oppose price hikes.  According to a 
senior Yemeni NGO democratic expert, Northern tribes and 
members of the military who benefit from diesel smuggling are 
fueling the opposition to economic reform.  Northern Brigade 
Commander Ali Muhsen, rumored a potential successor to Saleh, 
is said to be behind the opposition and many in Sanaa note 
that it is his papers that are predicting economic disaster 
if such reforms are implemented. 
 
¶6. (SBU) PM Ba Jammal announced on January 6 that Parliament 
passed the government's budget late the previous evening by a 
majority of 161 votes, versus 25 opposing, and six 
abstaining.  Many from the opposition Islah and YSP parties 
simply walked out during the session.  (Note: Details of this 
session will be covered septel.  Semi-official al-Thawra 
daily bannered "no increases in oil or oil or gas 
derivatives."  End Note). 
 
-------- 
Comment: 
-------- 
 
¶7. (C) Although the executive in Yemen is not required to 
seek approval of its budget program from Parliament, Saleh 
put the budget before Parliament with the economic reform 
package attached in a likely attempt to delay implementation 
and gain political cover for reforms that are not popular 
with the public.  Parliament seized the opportunity to 
leverage some of their long-standing complaints on corruption 
and fiscal decentralization.  Post believes that most MPs 
simply oppose reforms because they will personally lose 
revenue, however, there are several reform minded MPs working 
to stop the reform package because they believe the ROYG is 
not doing enough to fight corruption.  Saleh, who has stayed 
out of the high-volume debate, allowed Parliament to voice 
its opposition and was able to put off frustrated World Bank, 
IMF and Donor reps calling for the economic reform package. 
Mission's MEPI and USAID funded activities in 
decentralization and parliamentary strengthening will serve 
to buttress the continued effort to reform. 
 
¶8. (C) Comment continued. While Parliament's central goal to 
decentralize is still actively being debated, Saleh's 
announcement on judicial reform is likely a concession to 
Parliament's long-standing corruption complaints.  Removing 
the diesel subsidy and implementing the general sales tax 
would have seriously affected tribal and business interests, 
crucial to Saleh's balance of power.  The political will to 
take on those measures is still clearly not there. 
Nevertheless, Parliament continues to gain momentum on issues 
of corruption and decentralization and the liberal minded at 
least are proving to be a positive force against 
state-corruption, even as the majority are still blocking 
needed economic reform.  Senior ROYG officials hoping to gain 
democratic cover for their self interested policies have 
unwittingly unleashed an increasingly vocal and active 
Parliament.  End comment. 
KHOURY