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Cablegate: Yemen Request for Fy07 Commodities Donation Under


DE RUEHYN #2070/01 2011301
P 201301Z JUL 06





E.O. 12958: N/A



1.(U) Embassy Sanaa seeks $20 million in FY2007 Food for
Progress commodities donations. The commodities will be used
for rural agricultural development program assistance geared
to capacity building and market reform, poverty alleviation
through micro credit financing programs, and meeting critical
water needs through environmentally sound projects in water
capture and irrigation.

2.(U) 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, and a
looming water shortage crisis. 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 also a valued partner in USG efforts to combat terrorism.
An FFP commodities donation is not only well deserved but an
excellent mechanism for enhancing the image of the USG in the
eyes of the average Yemeni. END SUMMARY.

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Yemen is an FFP Priority Country

3.(U) 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 poorest
country in the Middle East, Yemen has a per capita GDP of
approximately $720 dollars 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. All of these factors combine to present
extraordinary challenges for the agriculture sector in Yemen,
from the Ministry of Agriculture down to the poor, rural,
subsistence farming families. The USDA FFP program will
assist the ROYG in its struggle to overcome these challenges
and enhance the image of the USG throughout Yemen, especially
among the rural population.

--------------------------------------------- ---
USG Coordination with Strong Yemen Stakeholders
--------------------------------------------- ---

4.(U) 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).
True partners, these officials have demonstrated their
commitment to the objectives of the food aid program.

Commodities Requested and Market Impact

5.(U) Commodities Requested: Due to the critical nature of
the situation in Yemen, Post requests $20 million dollars in
commodities donations from the Food For Progress program; $15
million of soft white wheat (SWW) and $5 million of wheat

6.(U) 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.

Commodity donations of wheat and flour will not impact the
domestic production and will increase Yemeni consumers'
exposure to U.S. wheat and flour products, thereby increasing
demand and allowing U.S. wheat and flour exports to command a
higher market share in Yemen.


7.(U) 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 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 the USG appreciation
and support for the Yemeni people. The FY07 projects have
been selected as those most likely to enhance the image of
the USG in the hearts and minds of Yemeni citizens while
mitigating some of the increasing economic and social
challenges facing the ROYG.

Use of Commodities

8. (U) Use of the Commodities: The commodities requested
will be used to fund programs with three distinct goals:
addressing the critical water shortage, poverty alleviation
in rural agriculture communities, and improved capacity in
the agriculture 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 go toward the alleviation of 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 water and electricity
infrastructures. These systems will support greater capacity
and higher quality produce. 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. The potential
micro-credit market in Yemen is enormous and the sector is
only in its infancy. In Yemen, 75 percent of the population
live in rural areas and they depend upon farming as their
sole source of earned income. More than 40 percent of the
population live in poverty and less than 1 percent of Yemenis
have banks accounts. The micro-finance programs will provide
loans to individuals and families. The programs will also
aim to increase the involvement of women in the family and
community economies. These loans will allow small and micro
entrepreneurs to obtain financial support for small private

sector initiatives. The programs will enable them to
increase their income, create employment and income
generating opportunities in their communities, and to
stimulate local markets. The micro-finance programs funded
will 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 will 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 will 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 will 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 will enhance its image among the
individual farmers and farming communities as they realize
greater prosperity through increased capacity and market

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