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UNCLAS SECTION 01 OF 05 SANAA 002460 
 
SIPDIS 
 
STATE - PASS TO USDA FAS. USDA - PASS TO USDA/FAS/EXPORT 
CREDITS FOR MARY CHAMBLISS, DEPUTY ADMINISTRATOR AND 
USDA/FAS/EXPORT CREDITS FOR RON CROUSHORN, DIRECTOR, 
PROGRAMMING DIVISION. CAIRO - PASS TO AGRICULTURAL 
COUNSELOR ASIF CHAUDHRY AND AGRICULTURAL ATTACHE FREDERICK 
GILES. 
 
E.O. 12958: N/A 
TAGS: EAGR EAID YM
SUBJECT: UNABATED POVERTY AND MALNUTRITION: YEMEN REQUESTS 
FY06 USDA FOOD AID THROUGH PL 480, TITLE I AND FOOD FOR 
PROGRESS 
 
REF: STATE 00139203 
 
¶1. (U) Summary: Embassy Sanaa seeks FY-2006 PL-480 Food for 
Progress commodities for rural agricultural development 
program assistance in counterterrorism, poverty alleviation, 
and critical water needs.  Post requests assistance in the 
form of $4.4 million in concessional loans and $15.5 million 
in donations. 
 
    Section 1: Yemen Situation Report 
    Section 2: USG Coordination with Yemen Stakeholders 
    Section 3: Projects and Commodities Requested 
    Appendix:  Tables on Market Size and Displacement 
 
 
--------------------------------------------- ----- 
SECTION 1: YEMEN SITUATION REPORT: RURAL FARMERS IN NEED, 
WIDESPREAD POVERTY AND MALNUTRITION 
--------------------------------------------- ----- 
 
¶2. (SBU) Yemen is among the least developed countries in the 
world.  Crushing poverty, an explosive population growth 
rate, and pervasive malnutrition combine to form an 
extraordinary challenge for poor, rural, subsistence-farming 
families.  Yemen's population growth rate is the highest in 
the Middle East, at an estimated 6.8 children per woman. The 
median age is less than 15 (Yemen Census 2004), and the life 
expectancy of an infant born in 2004 is only 59 years (World 
Bank 2004).   Malnutrition levels closely rival some 
sub-Saharan African countries.  According to a 2003 UNICEF 
survey, almost 50 percent of the children under age 5 are 
moderately to severely malnourished.  For the children, who 
now comprise more than fifty percent of the population, there 
is little hope for economic advancement.    Official 
unemployment stands at 35 percent, but according to 
international observers the true figure hovers closer to 50 
percent.  Out of desperation, many young people seek 
employment across the border, sometimes 
when they are younger than ten years old.  According to 
UNICEF Director Ramesh Shrethra, reports indicate nearly 
every single household in the border governorates of Mahweit, 
Hajja and Saada have at least one or two children working in 
Saudi Arabia. 
 
¶3. (U) Despite these obstacles, the Yemeni government has 
demonstrated an eagerness to address economic issues through 
its efforts to initiate development programs targeting the 
country's agricultural economy.  They are doing so in 
partnership with donors such as Holland, the UN, UN Food and 
Agricultural Organization, the World Bank, as well as the US 
through the USDA food aid programs. 
 
 
--------------------------------------------- ----- 
SECTION 2: USG COORDINATION WITH YEMEN STAKEHOLDERS 
--------------------------------------------- ----- 
 
¶4. (U) Since the beginning of the USDA food aid program in 
Yemen in 1999, the Embassy has been working closely with USDA 
officials and Yemeni government officials at the Social Fund 
for Development (SFD), the Public Works Project (PWP), 
Ministry of Agriculture and Irrigation (MAI), and the 
Ministry of Planning and International Cooperation (MOPIC) to 
program the USDA food aid funds.  Yemen has received on $10 
to $22 million annually to focus on rural agricultural 
development in Yemen. 
 
 
--------------------------------------------- 
SECTION 3: PROJECTS AND COMMODITIES REQUESTED 
--------------------------------------------- 
 
¶5. (U) Despite the many challenges facing Yemen, it has 
established itself in the region as one of the few countries 
to establish democratic institutions.  Since 1995, the Yemeni 
Government has pursued an economic reform strategy, based on 
free-market principles, guided by the IMF/World Bank.  Yemen 
continues its commitment to introduce or expand free 
enterprise elements into their agricultural economy, and as 
such is a prime candidate for the PL 480 program.  To support 
the Government in developing the agricultural sector, Post 
intends to utilize donated commodities toward free enterprise 
initiatives in rural agricultural communities.  Such project 
will include rural financial credit access, women in 
agriculture, livestock improvement, plant and animal 
productivity improvements, and marketing of agricultural 
products.  These programs fit well with the objectives of the 
Food for Progress program in that they support agricultural 
development and address critical humanitarian needs in Yemen. 
 
 
¶6. (U) The Embassy proposes use of the monetized commodities 
for the following programs: 
 
PROJECT 1:  Rural Financial Credit System 
----------------------------------------- 
 
a)     Value and Type of Commodity requested: $4.0 million in 
long grain, parboiled rice and $340,000 in vegetable oil 
b)     Possible NGO/government implementers: CARE 
International; Taiz Women's Union; the quasi-governmental 
microfinance institution, SCDF; the Commercial and 
Agricultural Credit Bank 
 
c)     Use of Commodities or Revenues: The government will 
sell the commodities and use the proceeds to develop a rural 
financial credit or village banking system for poor 
subsistence farmers.  Funds will be used to train local 
outreach workers, formulate education campaigns, create a 
monitoring and accounting system, hire accountants and 
consultants, and then use $2 million as capital. 
 
d)     Justification for Request: Opportunities in Yemen for 
small borrowers in rural areas are almost non-existent due to 
structural flaws in the financial and legal sectors.  Despite 
the aversion of commercial banks to offer individual lending, 
especially to agriculture, some microfinance and small and 
medium enterprise initiatives have shown surprising results 
in rural areas.  Several of these organizations have the 
capacity to absorb increased capital, and to offer 
agricultural and small business loans to women and rural 
Yemenis. 
 
e)     Market Displacement Analysis: Post recommends long 
grain, parboiled rice because its donation will not affect 
local production or commercial sales.  Yemen does not produce 
rice and the donation will account for just 8 percent of the 
total market in Yemen. 
 
 
PROJECT 2:  Women in Agriculture 
-------------------------------- 
 
a)     Value and Type of Commodity Requested: $4.0 million of 
soft white wheat 
 
b)     Possible NGO/Government Implementers: ADRA 
International; local UN-certified NGO, the Charitable Society 
for Social Welfare; Social Fund for Development. 
 
c)     Expected Use of Commodities or Revenues: This program 
will focus on facilitating the education of women in new 
methods of water-efficient irrigation and crop production. 
In addition to teaching women about water-conservation, 
irrigation methods, modern and safe pesticides, and soil 
replenishment, the program will also integrate maternal and 
child health and nutrition training. 
 
d)     Justification for Request: In Yemeni society, rural 
women perform the majority of agricultural work.  As such, 
effective and efficient methods for crop management are best 
taught to women.  In addition, the maternal death rate from 
childbirth is an astronomical 350 deaths per 100,000 live 
births in Yemen according to UNICEF.  The program will teach 
health, prenatal, and child care skills that will help 
address this dire issue along with basis nutrition. 
 
e)     Market Displacement Analysis: Post recommends soft 
white wheat because its donation will not affect local 
production or commercial sales.  Soft white wheat is a key 
staple in the Yemeni diet and highly preferred over other 
forms of wheat.  In addition, domestic production accounts 
for only 5 percent of the market and the total donation for 
all programs in soft white wheat will amount to a mere 2 
percent of the market. 
 
 
PROJECT 3: Livestock Sector Improvements 
---------------------------------------- 
 
a)     Value and Type of Commodity Requested: $2.5 million in 
corn and $920,000 in soybean meal 
 
b)     Possible NGO/Government Implementers: Red Sea 
Livestock Trade Commission; Livestock Division of the 
Ministry of Agriculture and Irrigation; Social Development 
Fund, Public Works Project; CARE International 
 
c)     Expected Use of Commodities or Revenues: The 
Government will sell the commodities and use the proceeds to 
develop a quarantine station in the port of Mokha.  The 
facilities will include containment pens, a laboratory, 
quarantine facility for sick animals and a processing center 
to accept healthy incoming livestock to enter Yemen 
certified.  This project is part of a network of 
independently developing quarantine stations in Djibouti, 
Kenya, and other countries on both sides of the Red Sea 
livestock trade.  The Djibouti program is funded by USAID and 
this program will connect to the work already in progress 
there.  Training in Mokha and coordination with the entire 
network will provide a more seamless tracking system for 
individual livestock as they move across both land and sea 
borders on both sides of the Red Sea for disease control 
throughout the region. 
 
d)     Justification for Request: In the fall of 2000 to the 
winter of 2001, the Yemeni cattle market collapsed as a 
result of the outbreak of Rift Valley Fever.  Rift Valley 
Fever entered Yemen via cattle shipped from Somalia on a 
variety of vessels which were unlicensed and without proper 
import permits to Yemen, said David Ward, Senior Livestock 
Advisor, FAO Rome.  Yemeni Ministry of Agriculture Livestock 
Director Dr. Ghaleb Al-Iryani states that there were more 
than 1500 Yemenis who died from the epidemic.  This 
information was confirmed by USAID Yemen Senior Economic and 
Agricultural Advisor Dorvin Stockdale.  The same factors that 
allowed the epidemic to begin and spread remain unchanged. 
Yemen is ripe for another outbreak of a variety of diseases 
according to a 2005 US Department of Defense review of the 
livestock situation in Yemen. 
 
f)     Market Displacement Analysis: Post recommends this 
commodity because its donation will not affect local 
production or commercial sales.  There is no domestic corn or 
soybean meal production, and PL-480 donation will each 
account for only four percent of the market. 
 
 
PROJECT 4: College Scholarships for Study of Agricultural 
Sciences by Rural Disadvantaged Students 
--------------------------------------------- 
 
a)     Value and Type of Commodity Requested: $2.0 million of 
soft white wheat and $1.75 million in wheat flour 
 
b)     Possible NGO/Government Implementers: local NGO, Dar 
Al-Rahma; Social Fund for Development 
 
c)     Expected Use of Commodities or Revenues:  The proceeds 
will develop a university scholarship program both at 
undergraduate and graduate levels for disadvantaged students 
from rural areas of Yemen for overseas study.  A joint US and 
Yemeni committee will select the participants from rural 
areas through interviews and academic achievement.  The 
committee will consist of representatives from AMIDEAST, 
local universities representatives, USAID, US Embassy, and 
local organizations such as Dar Al-Rahma.  In order to 
participate in the program, the candidates must demonstrate 
strong academic potential and maintain an acceptable GPA 
while in either high school or university.  Candidates will 
be required to study within a field of agriculture such as 
agronomy, animal science, soil science, water and irrigation 
management, agricultural economics, agri-business management 
and other fields of agriculture which would have benefit for 
Yemen.  Funds for per diems and stipends would be provided to 
participants through 
 any NGO or government agency administering the program and 
would also provide for initial employment opportunities 
within rural areas upon completion of studies. 
 
d)     Justification for Request: Seventy percent of the 
population is employed in the agricultural sector within 
Yemen.  However much of this sector is at subsistence level 
with job opportunities limited.  Agricultural education is 
limited as are opportunities for new technologies to be 
introduced or the agricultural sector to be transformed. With 
improved agricultural education and the introduction of ideas 
from Yemeni's trained outside of Yemen, which is 
traditionally a closed society, this will allow for improved 
agricultural techniques and marketing methods to be 
introduced by Yemeni's themselves. 
 
e)     Market Displacement Analysis: Ninety percent of the 
wheat and wheat flour market in Yemen consists of unprocessed 
wheat.  Most wheat is milled in one of five large capacity 
flour mills or in thousands of small capacity neighborhood 
mills throughout the country.  As such, the total program 
requests a ratio of approximately 80 percent wheat to 20 
percent wheat flour.  The total request for soft white wheat 
and wheat flour comprises a 2 and 4 percent displacement 
respectively. 
 
¶7. (U) The Embassy would like to propose the following 
program using the commodities offered in the concessional 
loans: 
 
 
PROJECT 5: Plant Productivity Improvements 
------------------------------------------ 
 
a)     Value and Type of Commodity Requested: $4.4 million of 
long grain, parboiled rice 
 
b)     Possible NGO/Government Implementers: Mercy Corps; 
CARE International; ICARDA 
 
c)     Expected Use of Commodities or Revenues: The program 
will facilitate the training and introduction of genetically 
improved crops. These crops must be selected on the basis of 
their water-conservancy, high nutritional value, and health 
and safety benefits to the soil.  The proceeds of the 
commodity sales will fund ongoing agricultural technology and 
biotech education programs throughout the country to augment 
this initiative. 
 
d)     Justification for Request: Only three percent of Yemen 
is considered arable land with much of the country being arid 
or semi-arid.  Water is considered to be one of the most 
valuable commodities in Yemen both for agriculture and human 
consumption.  Land and water are both a natural resource in 
scarce supply.  This in combination with the malnutrition 
cited earlier, improvements in nutrition availability and 
productivity provided by genetically improved crops would 
lift the tide of poverty, water scarcity, and malnutrition in 
Yemen. 
 
e)     Market Displacement Analysis: Post recommends long 
grain, parboiled rice because its donation will not affect 
local production or commercial sales.  Yemen does not produce 
rice and import account for just 8 percent of the total 
market in Yemen. 
 
 
-------- 
APPENDIX 
-------- 
 
TABLE A: Yemen Bulk Commodities Market, 2006 Estimate 
 
                       (I)      (P)        (C)  %(P)  %(I) 
Commodity           Import Domestic      Total   of    of 
                           Productn  Consumptn   (C)   (C) 
                      (MT)     (MT)        (MT) 
--------------------------------------------- -------------- 
Soft White Wheat 1,600,000  103,800  1,703,800   6%   94% 
Wheat Flour        160,000        0        n/a   0%    0% 
Corn               292,000   32,800    324,800  10%   90% 
Soybean Meal        90,000        0     90,000   0%  100% 
Rice               295,000        0    295,000   0%  100% 
Vegetable Oil      170,000   59,000    229,000  26%   74% 
--------------------------------------------- -------------(S 
ource: Ministry of Industry and Trade 2003, distributor 
interviews 2005) 
 
 
 
TABLE B: Yemen Bulk Commodities Market Displacement, 2006 
Estimates for PL-480 Commodity Request 
 
                       (I)    (D)       (P)       (C)  %(D) 
Commodity           Import PL-480  Domestic     Total    of 
                                   Productn             (C) 
                      (MT)   (MT)      (MT) 
--------------------------------------------- -------------- 
Soft White Wheat 1,600,000  30,000  103,800  1,710,800  2% 
Wheat Flour        160,000   7,000        0    165,000  4% 
Corn               292,000  14,000   32,800    338,000  4% 
Soybean Meal        90,000   4,000        0     97,000  4% 
Rice               295,000  24,000        0    299,000  8% 
Vegetable Oil      170,000   1,000   59,000    232,000 .4% 
--------------------------------------------- -------------- 
(Source: Ministry of Industry and Trade 2003, distributor 
interviews 2005) 
 
 
TABLE C: Commodity Breakdown by Project 
 
--------------------------------------------- ------------- 
Project 1:     Rural Financial Credit System 
$4.0 million     11,428 MT long grain, parboiled rice 
$340,000          1,000 MT vegetable oil 
 
Project 2:     Women in Agriculture 
$4.0 million     20,000 MT soft white wheat 
 
Project 3:     Livestock Sector Improvements 
$2.52 million     14,000 MT corn 
$920,000           4,000 MT soybean meal 
 
Project 4:     Scholarships for the Rural Disadvantaged 
$2.0 million      10,000 MT soft white wheat 
$1.75 million      7,000 MT wheat flour 
 
Project 5:     Plant Productivity Improvements 
$4.4 million      12,571 MT long grain, parboiled rice 
 
Total: 
$19,930,000       80,000 MT 
--------------------------------------------- ------------- 
Krajeski