VZCZCXRO1917
PP RUEHDE
DE RUEHYN #0926/01 0941334
ZNR UUUUU ZZH
P 041334Z APR 06
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 3451
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  PRIORITY

UNCLAS SECTION 01 OF 04 SANAA 000926 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV KDEM KMPI KMCA ECON PHUM YM
SUBJECT: FREEDOM AGENDA BRINGS DOWN GOVERNMENT: 2006 FIRST 
QUARTER REPORT 
 
REF: A. SANAA 342 
     ¶B. SANAA 2005 2922 
     ¶C. SANAA 537 
     ¶D. SANAA 649 
     ¶E. SANAA 392 
     ¶F. SANAA 146 
 
SANAA 00000926  001.2 OF 004 
 
 
¶1. SUMMARY: The Freedom Agenda had a dramatic impact in Yemen 
within the last quarter, resulting in significant advances in 
fighting corruption, women's representation in government, 
independence of the judiciary, and other key areas.  Post 
marshaled a multilateral initiative to pressure President 
Saleh directly on Freedom Agenda goals, and he responded by 
naming a new government with a mandate for reform.  The 
prospect of rejoining the Millennium Challenge Account (MCA) 
helped serve as a strong incentive for the ROYG to improve 
governance, and targeted USAID and MEPI programs helped 
strengthen the role of Parliament, local councils, and the 
courts.  The next quarter will be critical for advancing the 
Freedom Agenda.  Post is looking to build on recent successes 
by engaging the new reform-minded cabinet.  To do so, 
particulary in elections monitoring, we will need additional 
support from Washington.  END SUMMARY. 
 
-------------------------------------- 
U.S. Leads Full-Court Press For Reform 
-------------------------------------- 
 
¶2.  Freedom Agenda goals currently lead the political agenda 
in Yemen, and Post's diplomatic strategies are showing 
results on critical reform issues.  In the last quarter, Post 
combined bilateral meetings with ROYG officials, multilateral 
coordination with the donor community, and targeted programs 
to advance freedom and democracy in Yemen.  With a specific 
focus on fighting corruption, improving rule of law and press 
freedom, and promoting free and fair elections, these 
pressures culminated in President Saleh naming a new cabinet 
with a reform mandate. (Ref A) 
 
¶3.  Last quarter began with a setback, as Yemen was suspended 
from the MCA due to falling indicators. (Ref B) This delayed 
ROYG implementation of its MCA Threshold Plan, with reforms 
intended to reduce corruption and improve rule of law. 
Yemen's suspension was noted in a letter from MCC CEO 
Danilovich to President Saleh, detailing specific actions 
Yemen could take to be reinstated.  In the wake of this 
disappointing news, Post encouraged the ROYG to continue with 
reforms on its own accord, demonstrating to the MCA and 
others that Yemen was committed to changing course.  As part 
of this message, the Embassy consistently encouraged ROYG 
officials to expand the role of civil society and freedom of 
speech in political discourse. 
 
¶4.  At the same time, Ambassador gathered a group of 
international donors, including the embassies of Germany, the 
Netherlands, and the U.K, as well the World Bank, to discuss 
governance and corruption issues in Yemen.  The group 
developed a shared matrix of key short-term reforms the ROYG 
could undertake to demonstrate its political will, and 
engaged the Government in working groups on each of these 
issues.  The list included transparent tendering procedures, 
protection for journalists, and prosecution of corrupt 
officials. 
 
¶5.  In February, Ambassador and other heads of mission 
delivered these points in a joint meeting with President 
Saleh. (Ref C) Despite initial resistance by Saleh, he 
promptly adopted the reform objectives as his own, dismissed 
the Cabinet, and charged his new government with improving 
Yemen's performance on international indicators.  Many of the 
reform objectives have been adopted by the Cabinet, and Post 
is now monitoring progress on implementation.  Below is a 
detailed progress report for each of the five desired 
outcomes for Yemen under the Freedom Agenda: 
 
------------------ 
Reduced Corruption 
------------------ 
 
¶6.  The ROYG took dramatic steps in the last quarter to 
confront the problem of corruption.  Parliament is currently 
considering a law that would create an independent 
anti-corruption body, with investigative and prosecutorial 
powers. The law has strong support from the President, and 
would give teeth to existing oversight and auditing bodies. 
The President also assigned a task force to study procurement 
practices and to present a new tendering law.  The law is 
currently under consideration by the World Bank, and would 
create a more transparent High Tender Board. 
 
 
SANAA 00000926  002.2 OF 004 
 
 
¶7.  The USAID mission is preparing to support such efforts on 
corruption by dedicating approximately USD one million of ESF 
funds.  The program will begin this quarter with an 
assessment team, which will outline a comprehensive strategy 
for combating corruption in Yemen.  The team will analyze and 
make recommendations on key sectors, including public finance 
management, parliamentary oversight, and the business 
community.  Post then intends to offer buy-in to other donors 
to implement the anti-corruption strategy. 
 
¶8.  Post continued to participate in the multilateral Public 
Finance Management (PFM) reform group.  In coordination with 
the Ministry of Finance (MOF), the group drafted an action 
plan for budgetary reform, which was repeatedly blocked by 
the previous minister.  The newly appointed MOF, by contrast, 
is a strong supporter of PFM, and looks to sign a final 
agreement within the coming weeks.  Post had sought to 
contribute a Treasury advisor for budgeting as part of this 
initiative, but there are currently no available funds within 
USAID or MEPI for this purpose. 
 
¶9.  Progress was slower on trade reform, as the previous 
cabinet delayed Post's efforts to advance WTO-compliance in 
customs valuation, telecom regulations, commercial law, and 
other areas.  The initial indication is that the new 
ministers are more supportive of such reforms, and Post will 
attempt to capitalize on this new opportunity in the coming 
quarter.  Trade reforms remain key to improving Yemen's MCA 
indicators, and generally creating freedom for investment in 
Yemen. 
 
------------------------------ 
Open and Competitive Elections 
------------------------------ 
 
¶10.  With presidential and local council elections only six 
months away, electoral reforms became highly politicized in 
the last quarter.  The Embassy is contributing essential 
programs to the broader elections strategy coordinated by 
UNDP.  Under NDI's women and political parties program, all 
major parties adopted a new strategy of designating 15 
percent of local council districts for women candidates. 
Post will closely observe implementation of this plan.  The 
ruling GPC party decided independently to reserve 15 percent 
of its leadership positions for women, and two women 
surprisingly announced their candidacy for president. 
 
¶11.  Post played a mediating role between the GPC and the 
opposition in disputes over representation on elections 
oversight committees. (Ref D) To Saleh, Post urged compromise 
and stressed the importance of fair elections over one-party 
dominance of the system.  At the same time, Post urged the 
opposition to be realistic in their demands.  The SCER 
currently contends that it will nominate neutral committee 
members, but after several meetings between Saleh and the 
opposition, there remains a strong possibility that the two 
sides will still reach a compromise.  Some of these issues 
were exacerbated by the ROYG's unwillingness to adopt earlier 
recommendations made under a MEPI-funded IFES program to 
amend the electoral law. 
 
¶12.  NDI issued a critical report regarding by-elections in 
the newly created governorate of Raimah, in which there was 
reported to be considerable voter fraud.  In response to 
international criticism, Saleh agreed to allow international 
observers from the E.U. and elsewhere to monitor the national 
elections.  USAID is currently supporting an NDI monitoring 
program for the registration period.  Post supports a 
comprehensive elections monitoring program, as outlined in an 
unsolicited proposal from NDI to MEPI.  This would ensure 
coordination between international and local organizations, 
and allow for uniform conclusions on the administration of 
elections. 
 
------------------------ 
Strengthened Rule of Law 
------------------------ 
 
¶13.  The ROYG took the dramatic step of recommending the 
removal of the President as Head of the Supreme Judicial 
Council.  This was a major component of Yemen's MCA Threshold 
Plan, which it moved to implement even after being suspended 
from the program.  This came as a surprise to many observers, 
who believed it would take years to achieve this goal.  The 
change is currently in draft form, and must be approved by 
Parliament.  For the first time, the ROYG also opened the 
Higher Judicial Institute to women. 
 
¶14.  Several MEPI-funded programs began creating a network of 
reform-minded legal professionals.  ABA-CEELI held its first 
 
SANAA 00000926  003.2 OF 004 
 
 
workshop on law practice management, and a representative for 
the ABA delivered a well-received address on human rights to 
the Yemen Law Faculty.  Yemen sent four judges to Qatar, 
where they participated in commercial law training hosted by 
the Commercial Law Development Program, and five judges for 
training in intellectual property rights under the auspices 
of the U.S. Patent and Trademark Organization. 
 
----------------------------------- 
Increased Government Accountability 
----------------------------------- 
 
¶15.  Parliament set an important precedent last quarter, with 
support from a MEPI-funded NDI program, of overriding a 
presidential veto of its own by-laws.  In addition to 
asserting the constitutional power of the legislature, 
Parliament also expanded control over its own budget, agenda, 
and committee leadership.  The first test of its newfound 
independence, however, came with the election of the 
parliamentary leadership, and resulted in the reelection of 
the President's preferred candidates. (Ref E) 
 
¶16.  Post continued to make progress in government 
decentralization, in partnership with UNDP and other donor 
countries.  MEPI funds, administered by USAID, helped 
district governments draft and implement their own investment 
budgets and increase governance capacity.  The new MOF 
expressed strong support for decentralized government, and 
promised to transfer a great share of health and education 
budgets to the local level.  USAID will provide bridge funds 
for the decentralization program until December 2006. 
 
¶17.  The ROYG has also taken important steps to improve 
accountability in the oil and gas sector by joining the 
Extractive Industries Transparency Initiative (EITI). (Ref F) 
Post, the World Bank, and others urged the ROYG to sign EITI 
as an important step toward improved transparency in Yemen's 
most critical sector. (NOTE:  Approximately 80 percent of 
government revenue is derived from oil sales.  END NOTE.) 
 
¶18.  Yemen's civil society remained relatively energetic, and 
Post advanced a number of programs to make NGOs more 
effective in advancing reform.  MEPI small grants funded the 
production of a public awareness film on violence and women's 
education, while two more are expected on fighting terrorism 
and corruption.  Another MEPI program run by Partners for 
Democratic Change focused on teaching conflict resolution 
techniques to local leaders.  The Civil Democratic Forum, a 
local NGO, began a program to help transform welfare NGOs 
into effective forces for political change.  Post continues 
to explore the possibility of creating an NGO training center 
to improve the advocacy skills of local groups. 
 
-------------------------- 
Free and Independent Press 
-------------------------- 
 
¶19.  Ambassador and DCM again took strong public positions 
last quarter in defense of a free press, yet abuses against 
journalists continued.  A recent report by the Committee to 
Protect Journalists confirmed that the ROYG is not doing 
enough to protect the press.  Behind the scenes, however, 
Post worked to advance Freedom Agenda goals in private 
meetings with ROYG officials, pushing the Shura Council to 
include journalists and civil society when considering a new 
press law.  In addition, the new Minister of Information met 
with the Yemeni Press Syndicate, and offered to help them 
draft compromise legislation. 
 
------------------------- 
COMMENT: TIME FOR RESULTS 
------------------------- 
 
¶20.  In the last quarter, the President took a clear position 
in support of Freedom Agenda goals, and cleared his 
government of obstructionist ministers.  The new Cabinet 
responded quickly to international pressure for reform, and 
is implementing important measures to fight corruption, 
strengthen judicial independence, and improve governance. 
The next quarter will be an important test of the ROYG's 
commitment, however, with the run-up to elections and 
possible readmission to the MCA.  Changes in personnel and 
administrative procedures alone do not constitute reforms, 
but must be followed by measurable outcomes.  Following up on 
the successes of last quarter, Post will press for such 
outcomes as the next step of implementing the Freedom Agenda. 
 In some areas, however, such as public finance management, 
diminishing resources limit our options to effect change. 
Post welcomes any and all additional engagement from 
Washington to realize the Freedom Agenda in Yemen. 
 
SANAA 00000926  004.2 OF 004 
 
 
Krajeski