"TWINNING" - WORLD FOOD PROGRAM UPDATE

UNCLAS SECTION 01 OF 02 ROME 001957 SIPDIS AIDAC FROM U.S. MISSION IN ROME SENSITIVE UNCLASSIFIED PAGE 02 ROME 01957 01 OF 02 071320Z STATE FOR U/S LARSON, A/S PRM DEWEY, IO A/S HOLMES, EUR/WE, IO/EDA SWINNICK, E FOR CPENCE USDA/FAS FOR U/S PENN, MCHAMBLISS AND RTILSWORTH USAID FOR ADMINISTRATOR NATSIOS AND JBRAUSE, AA/DCHA WINTER, D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS USUN FOR AMBASSADOR NEGROPONTE AND MLUTZ GENEVA FOR RMA BRUSSELS FOR USEU NSC FOR JDWORKEN E.O. 12958: N/A TAGS: EAID AORC PREF EAGR AORC PREF EAGR EU WFP UN EU EAID WFP UN SUBJECT: "TWINNING" - WORLD FOOD PROGRAM UPDATE REF: (A) ROME 00007 SENSITIVE BUT UNCLASSIFIED - PLEASE TREAT ACCORDINGLY -------------- SUMMARY -------------- ¶1. (SBU) AS A FOLLOW UP TO REF A, US MISSION RECENTLY DISCUSSED WITH WFP'S JOHN POWELL THE LATEST THINKING RELATED TO "TWINNING" EFFORTS AIMED AT EXPANDING WORLD FOOD PROGRAM'S FUNDING BASE. TWINNING INVOLVES THE ESTABLISHMENT OF A MECHANISM/STRATEGY TO MATCH NON-TRADITIONAL DONORS OF FOOD AID COMMODITIES WITH EITHER TRADITIONAL OR PREFERABLY NON-TRADITIONAL DONORS OF CASH FOR THE DELIVERY OF HUMANITARIAN ASSISTANCE IN FOOD EMERGENCIES. WFP HAS SEEN UNCLASSIFIED PAGE 03 ROME 01957 01 OF 02 071320Z ITS EMERGENCY PORTFOLIO (INCLUDING IRAQ) FOR 2003 EXPAND FROM USD 2 BILLION (2002 LEVEL) TO USD 4 BILLION. POWELL ASSURED THAT WFP IS VIGOROUSLY PURSUING TWINNING - AND IS HOPEFUL OF AN EVIAN G8 ENDORSEMENT OF THE CONCEPT. END SUMMARY. -------------- --- WFP'S "ROLLING" EVOLUTION OF A TWINNING STRATEGY -------------- --- ¶2. (SBU) JOHN POWELL WALKED US MISSION STAFF THROUGH WFP'S EVOLVING TWINNING STRATEGY AS FOLLOWS: A) DONORS TO THE UNITED NATIONS WORLD FOOD PROGRAM (WFP) PRESENTLY MAKE THEIR CONTRIBUTIONS IN THE FORM OF FOOD COMMODITIES, SERVICES (SUCH AS SHIPPING AND TRANSPORT) AND CASH, ALL OF WHICH ARE NECESSARY TO MOVE FOOD FROM A DONOR TO SPECIFIC BENEFICIARIES. CASH IS THE MOST FLEXIBLE. DONORS OF COMMODITIES ARE ASKED TO PROVIDE THE CASH NEEDED TO MEET THE COSTS ASSOCIATED WITH THEIR CONTRIBUTION. THESE INVOLVE THE TRANSPORT, HANDLING AND STORAGE COSTS OF MOVING THE FOOD FROM THE DONOR COUNTRY TO THE BENEFICIARIES, WHO MAY BE LOCATED IN A LANDLOCKED COUNTRY IN ANOTHER CONTINENT. DONORS ARE ALSO ASKED TO PAY A PRO RATA SHARE OF THE OTHER OPERATIONAL AND SUPPORT COSTS ASSOCIATED WITH THE SET UP AND MANAGEMENT OF THE OPERATION SUCH AS MONITORING THE DISTRIBUTION OF THE FOOD TO MAKE SURE THAT IT ACTUALLY REACHES THOSE FOR WHOM IT WAS INTENDED. B) MOST DONORS TO WFP ARE COUNTRIES; AND ALL MAJOR DONORS UNCLASSIFIED PAGE 04 ROME 01957 01 OF 02 071320Z ARE MEMBERS OF THE OECD. SOME DEVELOPING COUNTRIES ARE EMERGING AS DONORS. THESE EMERGING DONORS ARE WILLING TO PROVIDE THE FOOD COMMODITIES BUT ARE UNABLE TO PROVIDE THE ASSOCIATED CASH. INDIA, FOR INSTANCE, DONATED ONE MILLION TONS OF WHEAT TO AFGHANISTAN. BUT IT REQUIRES MORE THAN USD 200 MILLION TO DELIVER THAT AMOUNT OF COMMODITIES TO BENEFICIARIES IN AFGHANISTAN. AND INDIA SIMPLY DOES NOT HAVE THE CASH. OTHER POTENTIAL DONORS INCLUDE REPUBLIC OF SOUTH AFRICA, PAKISTAN, CHINA, THAILAND, VIET NAM, BRAZIL AND THE UKRAINE, TO NAME A FEW. THERE ARE IMMENSE POSSIBILITIES - IF A MECHANISM CAN BE FOUND TO ENABLE PROSPECTIVE DONORS TO GIVE WHAT THEY HAVE, WHICH IS FOOD. C) THE CONCEPT OF TWINNING IS TO ESTABLISH A FINANCIAL FACILITY THROUGH WHICH CASH COULD BE MATCHED WITH THE COMMODITY CONTRIBUTIONS OF EMERGING DONORS THEREBY LEVERAGING SUBSTANTIAL ADDITIONAL QUANTITIES OF FOOD. THE LEVERAGE RATIO IS OFTEN HIGH. FOR EXAMPLE, A CASH DONATION OF USD 2 MILLION WOULD LEVERAGE 20,000 TONS OF RICE FROM INDIA TO SUPPORT VICTIMS OF THE CONFLICT IN SRI LANKA TO UNCLASSIFIED UNCLASSIFIED PTQ2919 PAGE 01 ROME 01957 02 OF 02 071321Z ACTION SSO-00 INFO LOG-00 AID-00 ANHR-00 EUR-00 E-00 UTED-00 TEDE-00 IO-00 NSCE-00 OIC-02 SS-00 TEST-00 PRM-00 SAS-00 /002W -------------- 611CA6 071321Z /38 P 071321Z MAY 03 FM AMEMBASSY ROME TO SECSTATE WASHDC PRIORITY 9708 USDA FAS WASHDC PRIORITY 2662 INFO EU MEMBER STATES COLLECTIVE AMEMBASSY KUWAIT AMEMBASSY NEW DELHI AMEMBASSY BANGKOK AMEMBASSY MOSCOW AMEMBASSY PRETORIA AMEMBASSY COLOMBO USEU BRUSSELS 3209 USMISSION GENEVA USMISSION USUN NEW YORK UNCLAS SECTION 02 OF 02 ROME 001957 SIPDIS AIDAC FROM U.S. MISSION IN ROME SENSITIVE UNCLASSIFIED PAGE 02 ROME 01957 02 OF 02 071321Z STATE FOR U/S LARSON, A/S PRM DEWEY, IO A/S HOLMES, EUR/WE, IO/EDA SWINNICK, E FOR CPENCE USDA/FAS FOR U/S PENN, MCHAMBLISS AND RTILSWORTH USAID FOR ADMINISTRATOR NATSIOS AND JBRAUSE, AA/DCHA WINTER, D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS USUN FOR AMBASSADOR NEGROPONTE AND MLUTZ GENEVA FOR RMA BRUSSELS FOR USEU NSC FOR JDWORKEN E.O. 12958: N/A TAGS: EAID AORC PREF EAGR AORC PREF EAGR EU WFP UN EU EAID WFP UN SUBJECT: "TWINNING" - WORLD FOOD PROGRAM UPDATE MAKE THE TRANSITION TO PEACE. THIS TRANSACTION WOULD OTHERWISE COST AROUND USD 6 MILLION. TWINNING IS THEREFORE A MECHANISM THAT CAN BRING DEVELOPING COUNTRIES INTO THE DONOR COMMUNITY IN A VERY SIGNIFICANT WAY. TWINNING WOULD ENABLE DEVELOPING COUNTRIES TO BECOME SUBSTANTIAL STAKEHOLDERS IN THE FINANCING OF HUMANITARIAN OPERATIONS ACROSS THE WORLD, A BURDEN HITHERTO BORNE MAINLY BY OECD COUNTRIES. FINALLY, THIS MECHANISM WOULD BE USED TO DIRECT FOOD ASSISTANCE TO SPECIFIC CATEGORIES OF PEOPLE, MAINLY VICTIMS OF MAN-MADE OR NATURAL DISASTER. THESE ARE PEOPLE WITHOUT THE MEANS TO HELP THEMSELVES. AS A CONSEQUENCE, TRANSACTIONS OF THIS KIND WOULD NOT BE TRADE DISTORTING. D) THE PROPOSAL IS TO ESTABLISH A SPECIAL FUND WITHIN WFP NAMED "THE G-8 FUND FOR EMERGING DONORS". THE FUND WOULD BE FINANCED BY G-8 MEMBERS BUT NON-G-8 MEMBERS WOULD BE INVITED TO CONTRIBUTE. THE FUND COULD BE ESTABLISHED AT SAY, USD 500 UNCLASSIFIED PAGE 03 ROME 01957 02 OF 02 071321Z MILLION, WHICH IS EQUIVALENT TO ABOUT ONE QUARTER OF WFP'S EXPENDITURE IN 2002. (NOTE. IT WOULD ALSO BE POSSIBLE TO CONSIDER THE ESTABLISHMENT OF AN ENDOWMENT FUND. AN ENDOWMENT WOULD INVOLVE MUCH LARGER INITIAL CONTRIBUTIONS, ESPECIALLY IN THE CURRENT POOR INVESTMENT CLIMATE. IT WOULD, HOWEVER, REDUCE THE NEED FOR REGULAR REPLENISHMENT. END NOTE.) THE FUND WOULD BE SEPARATELY MANAGED AND ACCOUNTED FOR BY WFP; AND IT WOULD BE SUBJECT TO AUDIT ACCORDING TO WFP'S FINANCIAL REGULATIONS. E) THE PROPOSAL MAKES SOUND FINANCIAL SENSE; AND IT AVOIDS SETTING UP COSTLY NEW ADMINISTRATIVE STRUCTURES AND ARRANGEMENTS. WFP'S OVERHEAD COSTS ARE 7 PERCENT. MOST IMPORTANTLY, IT WOULD INCREASE THE NUMBER OF DONORS BEARING THE EXTRA-ORDINARY COSTS OF DEALING WITH THE EXPLOSION OF HUMANITARIAN CRISES THAT NEED UNPRECEDENTED AMOUNTS OF FOOD AID. AS THE UN'S FOOD AID AGENCY, WFP IS ABLE TO ACHIEVE ECONOMIES OF SCALE IN ITS OPERATIONS WORLD-WIDE, THEREBY KEEPING COSTS LOW; AND IT HAS THE EXPERIENCE TO MANAGE TWINNING ARRANGEMENTS WITH EMERGING DONORS. END OF JOHN POWELL'S PRESENTATION. -------------- COMMENT -------------- ¶3. (SBU) WFP HAS SEEN ITS EMERGENCY PORTFOLIO (INCLUDING IRAQ) FOR 2003 EXPAND FROM USD 2 BILLION (2002 LEVEL) TO USD 4 BILLION. AS A RULE, DONOR BUDGETS RARELY GROW EXPONENTIALLY. INDIA (WHICH OFFERED ONE MILLION TONS OF WHEAT FOR AFGHANISTAN IN OCTOBER 2001, HAS NOW OFFERED UNCLASSIFIED PAGE 04 ROME 01957 02 OF 02 071321Z (APRIL) 50,000 MTS OF WHEAT FOR IRAQ, AND ANNOUNCED THAT IT WOULD ARRANGE (PAY) ALL OCEAN SHIPPING CHARGES TO WFP DESIGNATED PORTS IN THE REGION. BUT THE GOI CONCEDES THAT IT DOES NOT HAVE THE ADDITIONAL CASH TO PAY IN-COUNTRY TRANSPORT, SHIPPING AND HANDLING NOR WFP'S SUPPORT COSTS. JOHN POWELL IS HOPEFUL THAT A G8 ENDORSEMENT OF THE TWINNING CONCEPT/STRATEGY AT THE EVIAN SUMMIT WILL MOVE THESE KINDS OF OFFERS ALONG TO FRUITION. HALL UNCLASSIFIED > 2003ROME01957 - Classification: UNCLASSIFIED