VZCZCXRO4312
PP RUEHDE
DE RUEHYN #0872/01 0871302
ZNR UUUUU ZZH
P 281302Z MAR 06
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 3392
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHRC/USDA FAS WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 SANAA 000872 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EAGR EAID YM
SUBJECT: USDA SIGNING: A SMALL STEP FOR FOOD AID, A BIG 
STEP FOR YEMEN 
 
 
¶1. SUMMARY:  After months of questions about the USDA Food 
For Progress program in Yemen, Ambassador started fresh on 
March 27, signing an allocation minute with the ROYG to fund 
programs with 2004 funds.  The new agreement seeks to correct 
many past problems by introducing new transparency and 
oversight measures.  It will fund critical programs in health 
and agriculture, and complete work on Phase 3 of the Saila 
drainage road in Sanaa.  Most importantly, Yemen's new 
cabinet appears serious about controlling corruption -- a 
positive sign for broader reform efforts under the Millennium 
Challenge Account and the Freedom Agenda.  END SUMMARY. 
 
--------------------------------------- 
Ambassador Rolls Out 2004 USDA Programs 
--------------------------------------- 
 
¶2. On March 27, Ambassador signed an allocation minute with 
the ROYG for 2004 USDA Food For Progress programming.  In 
addition to Ambassador, Minister of Planning Abdulkarim 
Al-Arabi and Minister of Finance Seif Al-Asali were also 
signatories.  Arhabi praised the collegial process that 
produced the agreement, and emphasized the quality of the 
projects selected.  Ambassador highlighted the value of this 
program, as it directly links American farmers to the Yemeni 
people, helping to provide them with long-term stability and 
security. 
 
¶3. Under 416 (b) funding totaling almost USD 12 million, the 
Embassy and the ROYG agreed to: 
 
* Complete the third phase of the Saila drainage road in 
Sanaa; 
* Provide management to the President Hospital in Marib; 
* Construct a new hospital in Shabwa; 
* Provide micro-loans to small businesses; and 
* Undertake a variety of infrastructure projects through the 
Social Fund for Development. 
 
¶4. Under PL-480 funding, totaling nearly USD 11 million, the 
Embassy and the ROYG agreed to: 
 
* Support agricultural water projects; 
* Fund projects for livestock, veterinary care, and plant 
production/protection; and 
* Complete the Maghrabah rural access road. 
 
--------------------------- 
A New Way of Doing Business 
--------------------------- 
 
¶5. The agreement was delayed over six months due to 
irregularities in the management of funds.  By the ROYG's 
admission, over USD 12 million in USDA funds had been 
misallocated since 2001.  In early December, 2005, a USDA 
compliance team visited Sanaa to investigate these findings 
and to recommend improved practices.  Post is awaiting a 
final report from the USDA compliance team detailing their 
findings. 
 
¶6. In the interim, the 2004 allocation minute established new 
procedures for managing USDA funds to improve transparency. 
All USDA money will be held in interest-bearing accounts in a 
commercial bank (the Yemen Bank for Reconstruction and 
Development).  The ROYG will provide regular bank statements 
to post, and all transfers will require authorization from 
both parties.  In addition, the ROYG agreed to wave customs 
fees on donated commodities in future agreements, and to 
clearly itemize administrative fees associated with the 
program. 
 
------------------------ 
Promises of Transparency 
------------------------ 
 
¶7. In a reference to the irregularities that have plagued 
Food For Progress in Yemen over the past year, Arhabi 
expressed his regret that Yemen was not included in the 2005 
program.  He also promised greater transparency in the 
implementation phase of the program.  Ambassador shared his 
optimism for the future of Food For Progress programs in 
Yemen, and was hopeful that the ROYG would be included in the 
2006 commodities allocation. 
 
----------------------- 
Turning Over a New Page 
----------------------- 
 
¶8. COMMENT:  What a difference a new cabinet makes.  Until 
recently, questions about USDA funds threatened the program 
with cancellation, and seemed to exemplify the overall spirit 
of mismanagement and corruption in the ROYG.  With the 
 
SANAA 00000872  002 OF 002 
 
 
signing of the 2004 allocation agreement, the newly appointed 
Ministers of Finance and Planning appear eager to turn over a 
new page.  They readily agreed to critical reforms, such as 
the use of commercial bank accounts, which had long been a 
point of contention with the previous cabinet.  In general, 
the Ministers are eager to strengthen relations with the 
Embassy and with the international community in general. 
This bodes well for the implementation of broader reforms 
necessary for the Millennium Challenge Account and the 
Freedom Agenda, and for the future of USDA assistance to 
Yemen.  END COMMENT. 
Krajeski