VZCZCXYZ0004
RR RUEHWEB

DE RUEHYN #1801/01 2621126
ZNR UUUUU ZZH
R 191126Z SEP 07
FM AMEMBASSY SANAA
TO RUEHRC/USDA FAS WASHDC
RUEHC/SECSTATE WASHDC 8066
INFO RUEHEG/AMEMBASSY CAIRO 0814

UNCLAS SANAA 001801 
 
SIPDIS 
 
SIPDIS 
 
USDA - PASS TO USDA/FAS/EXPORT CREDITS EXPORT CREDITS 
DEPUTY ADMINISTRATOR AND USDA/FAS/EXPORT CREDITS FOR RON 
CROUSHORN, DIRECTOR PROGRAMMING DIVISION. AMEMBASSY CAIRO 
PASS TO USDA/FAS CAIRO 
 
E.O. 12958: N/A 
TAGS: EAGR EAID YM
SUBJECT: YEMEN REQUEST FOR FY08 COMMODITIES DONATION UNDER 
THE FOOD FOR PROGRESS PROGRAM 
 
REF: A. SANAA 1343 
     ¶B. SANAA 1414 
     ¶C. SANAA 1347 
 
------ 
SUMMARY 
------- 
 
¶1.  The ROYG is currently contending with a looming water 
crisis, explosive population growth, food insecurity, 
internal conflict, and increasing terrorist activity in the 
country.  To help ease the burden on the ROYG, a reliable 
partner in the GWOT, Embassy Sanaa seeks $20 million in 
FY2008 Food for Progress (FFP) commodities donations.  The 
commodities would be used for rural agricultural development 
program assistance geared to capacity building and market 
reform, poverty alleviation through aid and micro-credit 
financing programs, and meeting critical water needs through 
environmentally sound projects in water capture and 
irrigation.  An FFP commodities donation is not only well 
deserved and desperately needed but an excellent mechanism 
for enhancing the image of the USG as a reliable partner in 
the eyes of the average Yemeni. END SUMMARY. 
 
-------------------------------- 
Yemen is an FFP Priority Country 
-------------------------------- 
 
¶2.  Yemen has a per capita GDP of approximately USD 723 and 
has one of the fastest growing population rates in the world 
at 3.2 percent.  The population of Yemen now stands close to 
20 million and is expected to double within ten years. More 
than 75 percent of the population resides in rural areas and 
more than 50 percent of the children under the age of 5 are 
moderately to severely malnourished. The World Bank has 
declared that the water shortage in Yemen is an extreme 
crisis, citing the country's move toward a market-driven 
agriculture sector as a contributing factor. Over the past 
year the prices of wheat and other basic food commodities in 
Yemen have risen dramatically, causing civil unrest and 
discontent among much of the population. 
 
----------------------- 
Hunger Feeds Terrorism 
----------------------- 
 
¶3.  This civil unrest has been expressed through 
demonstrations and rioting in both cities and rural areas. 
The food insecurity felt by the people of Yemen may be 
feeding the recent rise in terrorist activity and conflict in 
the country.  According to local news accounts, the suicide 
bomber who killed 8 Spanish tourists in Marib on July 2, 
2007, was a poor street vendor who had been recruited by 
terrorists who found him crying outside of a mosque because 
he could not afford to buy food for his family.  All of these 
factors combine to present extraordinary challenges for the 
ROYG and the people of Yemen, from the Ministry of 
Agriculture down to the poor, rural, subsistence-farming 
families. 
 
¶4.  Yemen is a nascent democracy still in transition from the 
political and economic strife caused by the unification of 
North and South Yemen in the mid-1990s. The country is the 
poorest nation in the Middle East and is currently contending 
with explosive population growth, severe malnutrition, a 
looming water shortage crisis, increasing tension and public 
protest against rising prices of basic commodities throughout 
the nation (ref A), caring for approximately 56,000 persons 
displaced by an internal uprising (ref B), and increased 
terrorist activity. (ref C) Amid these challenges, the 
Republic of Yemen Government (ROYG) has remained committed to 
establishing democratic institutions, sustainable development 
and economic reform based upon free market principles. Yemen 
is a valued partner in USG efforts to combat terrorism.  The 
USDA FFP program would assist the ROYG in its struggle to 
overcome these challenges and enhance the image of the USG 
throughout Yemen, especially among the most vulnerable 
citizens, the very poor and rural population. 
 
--------------------------------------------- --- 
USG Coordination with Strong Yemen Stakeholders 
--------------------------------------------- --- 
 
¶5.  Since the beginning of the USDA food aid programs in 
1999, the Embassy has worked closely with the USDA/FAS 
offices in Washington and Cairo in order to accomplish the 
 
goals of the program and provide real benefits for the Yemeni 
people.  Additionally, the Embassy has identified and 
developed strong ties with Yemeni officials in the Social 
Fund for Development (SFD), the Public Works Project (PWP), 
the Ministry of Agriculture and Irrigation (MAI) and the 
Ministry of Planning and International Cooperation (MOPIC). 
These officials have demonstrated consistently their 
commitment to the objectives of the food aid program. 
 
--------------------------------------- 
Commodities Requested and Market Impact 
--------------------------------------- 
 
¶6.  Commodities Requested: Due to the critical nature of the 
situation in Yemen, Post requests USD 20 million in 
commodities donations from the Food For Progress program: $15 
million of soft white wheat (SWW) and $5 million of wheat 
flour. 
 
¶7.  Market Impact: Due to the rocky and mountainous terrain 
and desert conditions, Yemen is not, and will never be, a 
major grain producing country. Local production of wheat in 
Yemen represents only 5.4 percent of the market, while 
imports represent more than 94 percent. The amount of wheat 
and flour imported exceeds two million tons per year. U.S. 
wheat and flour face stiff competition in the Yemen market 
from Australian and Russian commodities of lower quality. Due 
to the current shortage of wheat in the international market, 
the ROYG is contending with public outcry against the rising 
price and perceived shortage of this staple commodity.(ref A) 
A commodities donation of wheat may alleviate this growing 
tension and create tremendous goodwill throughout the nation, 
all without having a negative impact on domestic production. 
Finally, increasing Yemeni consumers' exposure to U.S. wheat 
and flour will increase demand and allow U.S. wheat and flour 
exports to command a higher market share in Yemen. 
 
-------------- 
Justification 
-------------- 
 
¶8.  Justification:  Yemen is a designated Food For Progress 
Priority country and the ROYG deserves the continued support 
of the USG at maximum levels.  The ROYG has proven to be a 
dependable ally in the Global War on Terrorism (GWOT).  The 
ROYG devotes much of its own resources to those efforts while 
it struggles to achieve its equally important goals of 
establishing and strengthening democratic institutions, 
economic reform, sustainable development, and the health and 
welfare of its citizens. The USDA FFP is ideally suited to 
enable Post to assist the ROYG in those important efforts. 
More importantly, FFP donations demonstrate USG appreciation 
and support for the Yemeni people.  The FY08 projects have 
been selected as those most likely to enhance the image of 
the USG in the minds of Yemeni citizens while mitigating some 
of the increasing economic and social challenges facing the 
ROYG. 
 
------------------ 
Use of Commodities 
------------------ 
 
¶9.  Use of the Commodities:  The commodities requested will 
be used to fund programs with three distinct goals: 
addressing the critical water shortage, alleviating poverty 
in rural agricultural communities, and improving capacity in 
the agricultural sector. The programs will be targeted to 
improve conditions in the five poorest governorates of Yemen. 
Through international tenders, Post hopes to work with our 
Yemeni partners to fund programs designed to accomplish our 
goals as follows: 
 
A)  Addressing the Water Crisis:  Working with PWP, donation 
proceeds will fund projects that will address the water 
shortage through environmentally sound methods of water 
capture, desalination, and irrigation technology utilizing 
Yemen's great untapped renewable energy resources.  The water 
shortage in Yemen is at crisis levels.  The water table is 
currently falling at a rate of 20 feet per year and each year 
80 percent of Yemen's water is used for agriculture but less 
than 30 percent of rural residents have access to drinking 
water.  Water availability in Yemen is the lowest in the 
world, at 136 cubic meters annually per person compared to 
the world average of 7500 cubic meters per person.  The 
amount of water needed to meet food production requirements 
for self-sufficiency is 1,000 cubic meters per person 
 
annually. Yemen is an excellent candidate for the 
exploitation and use of renewable energy technology, 
specifically wind and solar powered desalination, water 
pumping, and irrigation technologies to increase the 
availability of water. 
 
Yemen has a 2500-kilometer coastline, more than 3500 hours of 
sunlight per year and, due to the mountainous terrain 
throughout the country, natural wind tunnels with consistent 
wind speeds of 8 meters per second.  Renewable energy 
technologies are uniquely suited to provide water and 
electricity to remote areas lacking necessary infrastructure. 
These systems will support greater capacity to provide 
drinking water for the communities served and much-needed 
irrigation for agricultural crops.  A collateral impact of 
theses technologies will be an ability to utilize the 
technology for rural electrification and to provide farming 
communities with clean drinking water. 
 
B)  Poverty Alleviation:  Working with SFD, donation proceeds 
will go toward poverty alleviation through rural 
micro-finance institutions and programs designed to provide 
aid to persons displaced by recent conflicts in rural areas 
and help them rebuild their communities and their lives. The 
potential micro-credit market in Yemen is enormous and the 
sector is only in its infancy.  In Yemen, 75 percent of the 
population lives in rural areas and they depend upon farming 
as their sole source of earned income.  More than 40 percent 
of the population lives in poverty and less than 1 percent of 
Yemenis have bank accounts.  The micro-finance programs would 
provide loans to individuals and families.  The programs 
would also aim to increase the involvement of women in the 
family and community economies. These loans would allow small 
and micro entrepreneurs to obtain financial support for small 
private sector initiatives.  The programs would enable them 
to increase their income, create employment and income 
generating opportunities in their communities, and stimulate 
local markets. The micro-finance programs funded would be 
concentrated in rural areas, financing agricultural 
activities and agricultural community businesses. 
 
C)  Increased Agriculture Trade Capacity:  Under the 
Integrated Framework for Trade Development Strategy, working 
with the Ministries of Agriculture and Trade, donation 
proceeds would go toward trade capacity building measures in 
the agricultural sector, training programs focused on 
agribusiness skills, export/import reform measures, market 
development, and market access programs in agriculture. The 
agriculture sector in Yemen is underdeveloped. The donation 
proceeds would be used to fund development programs focused 
on agriculture trade development and market access, and 
training in rural communities to increase the agribusiness 
skills of farmers. Finally, the programs would serve to fund 
programs focused on reform measures designed to encourage and 
support greater production in the agriculture sector through 
agricultural trade capacity development measures and 
increased market access for agriculture products.  By 
partnering with Yemen on reform and training measures 
designed to increase trade development activities in the 
agriculture sector and agribusiness skills in the rural 
communities, the USG would enhance its image among the 
individual farmers and farming communities as they realize 
greater prosperity through increased capacity and market 
access. 
 
--------------- 
COMMENT 
-------------- 
 
¶10.  The ROYG is at a critical crossroads and the USDA FFP is 
one of the best opportunities the USG has to assist it at 
this juncture.  Yemen is a desperately poor country.  Without 
assistance, the ROYG has neither the resources nor the 
capacity to address the growing concerns and development 
needs of its most remote rural areas, fight terrorism, and 
create market-oriented democratic reforms in its economy. 
The ROYG's inability to address the needs of the poor, 
coupled with rising food prices and a shortage of wheat on 
the international market, have all contributed to growing 
discontent and fear among the population of Yemen which, 
recent events suggest, may be making some of the most poor 
susceptible to extremists' recruitment efforts.  Working with 
our Yemeni partners, Post would be able to direct USDA FFP 
funds to the areas most in need of services and most 
vulnerable to terrorist recruitment and activity.  These 
areas are expanding daily.  If there was ever a time to 
 
address a problem in Yemen, it is now.  If we and the ROYG 
are unable to counter the lure of extremism with concrete 
assistance to the people of Yemen, then the tide could easily 
turn against the established democratic institutions, 
sustainable development and economic reform achieved by the 
ROYG until now.  The USDA FFP program, more than any other 
USG program, would make a critical contribution to stability 
in a key region of the world by enabling the ROYG to address 
the needs and concerns of its people without compromising its 
focus on democratic reforms. END COMMENT. 
SECHE