VZCZCXRO7650
PP RUEHAP RUEHBZ RUEHDBU RUEHDT RUEHKN RUEHLMC RUEHMJ RUEHMR RUEHPB
DE RUEHYN #2693/01 2621455
ZNR UUUUU ZZH
P 191455Z SEP 06
FM AMEMBASSY SANAA
TO RUEHC/SECSTATE WASHDC PRIORITY 5385
INFO RUCNCLM/MCC CANDIDATE COUNTRY COLLECTIVE PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP  PRIORITY

UNCLAS SECTION 01 OF 02 SANAA 002693 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV EAID ECON KMPI KMCA YM
SUBJECT: U.S. AND YEMEN FIGHT CORRUPTION WITH EYE ON MCC 
 
REF: A. SANAA 2254 
     ¶B. SANAA 146 
 
SANAA 00002693  001.2 OF 002 
 
 
¶1. SUMMARY: On September 13, Ambassador signed a USD 1.73 
million agreement with the Republic of Yemen Government 
(ROYG) for anti-corruption programming.  Minister of Planning 
and International Cooperation (MOPIC) Abdulkareem al-Arhabi 
is planning to visit Washington October 11-12 in advance of a 
broad fundraising Consultative Group (CG) meeting in London. 
Ambassador stressed that any additional U.S. assistance would 
come from the Millennium Challenge Corporation (MCC), which 
requires continued ROYG commitment to reform.  Much will 
depend on the new government named after the September 20 
elections, and Ambassador offered to host a meeting 
immediately after the elections with key ministers and donor 
representatives to discuss shared reform objectives.  END 
SUMMARY. 
 
--------------------------------------- 
USAID Backs ROYG in Fighting Corruption 
--------------------------------------- 
 
¶2. As part of post's strategy to strengthen anti-corruption 
efforts in Yemen, Ambassador and USAID Mission Director 
signed a Limited Scope Grant Agreement on September 13 with 
Arhabi.  The agreement outlines a commitment by USAID to 
spend USD 1.73 million on a range of anti-corruption 
activities, including tendering and tax reform, support for 
the judiciary, and investigative capacity within the 
government and in the media to tackle corruption cases. 
 
------------------------- 
MCC the Only Game in Town 
------------------------- 
 
¶3. Expanded cooperation in fighting corruption is part of a 
broader effort by the ROYG to improve its standing with MCC 
and regain eligibility as a Threshold country. In a meeting 
afterwards, Arhabi shared his intention to visit Washington 
October 11-12, in advance of a broader CG fundraising meeting 
in London, November 15-16. (Ref A) Ambassador said that he 
would be in the United States at the same time, and hoped to 
attend certain meetings with Arhabi.  He stressed, however, 
that any additional development money from the United States 
would have to come from MCC -- the ROYG will not be able to 
depend on significant new contributions from traditional 
sources of aid, including Economic Support Funds, the Middle 
East Partnership Initiative, or United States Department of 
Agriculture Food Aid.  Pressing developmental needs in Iraq, 
Afghanistan, and Lebanon, said Ambassador, have put 
additional pressures on these sources of funding. 
 
¶4. The upcoming September 20 elections will be an important 
factor in the MCC Board's decision, said Ambassador.  Other 
reform issues are also important, if not as high profile, 
including passage of bills on procurement and 
anti-corruption, and a decision to the join the Extractive 
Industries Transparency initiative. (Ref B)  A recent ROYG 
decision to spend USD 500 million on military aircraft does 
not help Yemen's case, said Ambassador.  Donor countries will 
wonder why Yemen would spend such a large sum on weaponry 
instead of schools or health clinics.  Arhabi agreed, saying 
he makes the same argument in Cabinet in favor of spending 
for development goals, but that the Ministry of Defense has 
its own agenda. 
 
------------------------------------------ 
Ambassador Pursues Common Vision on Reform 
------------------------------------------ 
 
¶5. Ambassador expressed his hope that the Gulf Cooperation 
Council (GCC) countries would show generosity in addressing 
Yemen's development needs at the upcoming CG, but did not 
know who would attend from Washington at this point.  Arhabi 
plans to visit a number of donor countries in advance of the 
CG, and Ambassador suggested a small meeting beforehand of 
reform-minded ministers and select members of the donor 
community.  Minister Arhabi welcomed the idea, and Ambassador 
suggested his residence as a venue. 
 
----------------------------------------- 
COMMENT: Where to Reform After Elections? 
----------------------------------------- 
 
¶6. The anti-corruption agreement between USAID and the ROYG 
is part of a broad push on reform since a new cabinet was 
appointed in February 2006.  There is little question that 
Arhabi and other key ministers (including Finance, Oil, and 
Justice) are committed to reforms required by MCC, the World 
Bank and others.  They have made significant progress in a 
number of areas, including the independence of the judiciary, 
public procurement, and elections administration, but the 
 
SANAA 00002693  002.2 OF 002 
 
 
future of reform and the reformers remains uncertain. 
Assuming President Saleh wins the upcoming election, all eyes 
will be fixed on changes to his government, particularly the 
office of Prime Minister.  For Yemen to win support from MCC, 
the GCC, and others, the post-election government must have 
an even greater commitment to reform than its predecessor. 
Krajeski