Policy dialogue session in Dhaka on WFP post-

UNCLAS ROME 003607

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FROM U.S. MISSION IN ROME

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STATE FOR A/S PRM DEWEY, IO A/S HOLMES, EUR/NE, EUR/WE,
SA/INS, IO/EDA SKOTOK
USDA/FAS FOR U/S PENN, MCHAMBLISS, RTILSWORTH AND LPANASUK
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE,
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS
BRUSSELS FOR USAID/PLERNER
USUN FOR MLUTZ
GENEVA FOR RMA/LYNCH AND USAID/KYLOH
NSC FOR JDWORKEN

E.O. 12958: N/A
TAGS: EAID EAGR AORC PREF KUNR WFP UN
SUBJECT: Policy dialogue session in Dhaka on WFP post-
delivery losses in Bangladesh

REF: (A) 02 ROME 02673

SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY.
NOT SUITABLE FOR INTERNET POSTING.

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SUMMARY
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1. (U) The International Food Policy Research Institute
(IFPRI) led a July 24 policy dialogue session in Dhaka to
review key findings and preliminary recommendations of its
WFP commissioned Food Aid Leakages study. Sub-studies on
losses linked to discharge in ports, transit losses through
the national Public Food Distribution System (PFDS) to the
district level, and from Local Supply Depots (LSD) to the
beneficiary - were presented. While loss rates were
acknowledged to be unacceptably high, GOB affirmed its
decision to vigorously pursue the study's recommendations
through adoption of a plan of action. End summary.

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Background
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2. (U) In May 2001, the WFP Rome Secretariat informed the
Executive Board of the commencement of a sustained effort in
Bangladesh with bilateral and multilateral food aid donors
(U.S., Canada, others) to address the problem of suspected
food leakage to non-targeted beneficiaries or elsewhere
through GOB-controlled distribution channels. WFP's initial
misgivings came from a 1997 request it made to IFPRI to
carry out a preliminary study to investigate the magnitude
of the problem of food aid leakages in WFP-sponsored
activities and develop a monitoring methodology capable of
controlling in-country losses. In 1998, a comprehensive food
commodity tracking system appraisal was carried out. In
1999, the WFP country office established a food transport
and storage-monitoring unit. Since then, efforts have been
made to inform vulnerable group and emergency operation
beneficiaries, as well as the public at large, of their
rights and entitlements related to rations.
In recent years WFP has also proceeded to open a number of
sub-offices throughout Bangladesh.


3. (U) The latest (and most ambitious) IFPRI study began in
October 2002 and fieldwork was concluded by March 2003. A
first draft of the findings was issued. With the caveat that
donors and the WFP leadership were convinced that this
process could not be rushed in order to assure complete GOB
ownership of the results, a final report dialogue session
was held in Dhaka on July 24, chaired by Dr. Quazi
Mesbahuddin Ahmed, Additional Secretary, Economic Relations
Division, Ministry of Foreign Affairs, and amply attended by
numerous responsible counterpart Ministries. US Mission/Rome
Humanitarian Attache Tim Lavelle and Program Analyst Phil
Lamade attended this session.

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Major findings
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4. (SBU) Port losses for WFP imports are adjudged by IFPRI
to be 1.55 percent of listed Bill of Lading Quantities.
Transit losses in the Public Distribution System (which
moves the commodities from the port to the district level
through the Ministry of Food) were calculated at 0.72
percent. Most worrying are losses from the local supply
depots (LSD) of the Ministry of Food through the finalS PENN, MCHAMBLISS,
RTILSWORTH AND LPANASUK
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE,
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS
BRUSSELS FOR USAID/PLERNER
USUN FOR MLUTZ
GENEVA FOR RMA/LYNCH AND USAID/KYLOH
NSC FOR JD


delivery to beneficiaries, which are calculated at 8 percent
for WFP's major effort in Bangladesh, the Vulnerable Group
Development (VGD) scheme. Part of these local losses are
attributed to the pressure to feed additional "ultra poor"
or destitute who are not officially listed beneficiaries
(i.e., dilution of rations); use of some of the food to pay
expenses related to handling and local transport; and
deliberate underweighing of rations at distribution sites by
local authorities. Note: WFP's VGD activity covers 500,000
vulnerable women on an annual basis. Bangladesh's "ultra
poor" are calculated at 30 million and the number of
chronically undernourished around 45-50 million, so that
there is constant "pressure" to feed more vulnerable people
than are listed on official coverage rolls. End note.


5. (U) In practice, GOB has been absorbing the port and in-
transit losses and crediting WFP with the Bill of Lading
quantities at the LSD level. Even so, port and in-
transit/storage losses up to the local level still
constitute a loss to the national wealth and failure to
seriously consider recurring shortfalls hardly provides any
concerted incentive to ratchet down these losses to
acceptable levels.


6. (U) At the end of the working session on July 24, it was
agreed by IFPRI and the concerned parties that the finalized
report and recommendations, in addition to a specific plan
of action with timetables - would be made available by mid-
September.


7. (SBU) On specific losses by category, the following:

-Ports: operational losses due to normal handling and
spillage is estimated to be 0.05 percent and the loss due to
pilferage and other forms of misuse is estimated at 1.50
percent. Losses due to pilferage appear to be associated
with the involvement of numerous agents and agencies in food
aid imports which makes assigning of direct responsibility
difficult (i.e., "too many cooks"); the absence of
appropriate legal mechanisms to provide financial incentives
to stevedores and other parties engaged in discharge; the
presence of "tainted" unions in the principal ports; and
collusion;

-Public Food Distribution System (PFDS): As per IFPRI, in-
transit and storage losses in the PFDS have substantially
declined in the 1990s. Transit loss of food grains, which
was as high as 3.5 percent of total distribution during the
1980s - declined to 0.30 percent between 1998 and 2002,
while storage losses were reduced from 1.5 percent to 0.72
percent. Despite progress, IFPRI sees room for further
improvements. In particular, an analysis of stock rotation
suggests that 35 percent of the food grain distributed to
beneficiaries is more than nine months old;

-LSD to final beneficiary: District level Union Parishad
(UP) chairpersons and members who distribute food grain to
beneficiaries report lengthy delays or non-receipt of
transport or handling commissions. Further, the approved
rates are generally not sufficient to cover all the costs
involved. Moreover, an absence of standardized and reliable
weighing techniques makes monitoring of correct rations
amounts difficult. IFPRI (through independent weighing of a
random sample size of beneficiaries) determined that under
delivery to the beneficiary averaged 7.53 percent and
discrepancies in beneficiary lists accounted for a further
0.48 percent loss, bringing the total leakage level in the
VGD program at the local level to 8.01 percent.S FOR U/S PENN, MCHAMBLISS,
RTILSWORTH AND LPANASUK
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE,
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS
BRUSSELS FOR USAID/PLERNER
USUN FOR MLUTZ
GENEVA FOR RMA/LYNCH AND USAID/KYLOH
NS


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Major Recommendations
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8. (SBU) The quantity recorded in a Bill of Lading should be
considered the reference quantity for agreements between the
GOB and donors on the amount of food grains delivered;

-The number of independent surveyors/agents involved in food
aid imports should be reduced and the process further
streamlined. Preferably, all tallies should be performed by
independent surveyors;

-Preference should be given to the port of Chittagong which
is more effectively managed than is Mongla port;

-A comprehensive data base should be developed by WFP,
Ministry of Food, shipping and lightering agents. This would
produce a common information set, available to all parties
without time lags;

-GOB should expedite payment of incentives to stevedores and
others engaged in the discharge process;

-In the PFDS system, transporters should assume full
responsibility for delivery of full invoiced quantities;

-International food aid arrivals should be scheduled so that
they do not coincide with the GOB's procurement season;

-The GOB and the donors should formulate a single cost
sharing arrangement to cover internal transport, shipping
and handling (ITSH) costs;

-Transportation and handling costs from the LSD to
distribution center should be assessed for each Union and
necessary allowances allocated in advance;

-Weighing of rations at distribution sites should be
performed using standard volume weighing measure;

-As involuntary sharing of food rations violates program
rules, steps should be taken to enforce a ban on this
process;

-The GOB and WFP should monitor program activity regularly
to observe whether unauthorized activities exist, and take
corrective measures, including strict disciplinary actions,
whenever such activities are detected.


9. (SBU) Note. IFPRI also propounded: a) downsizing of the
GOB's national security stock reserve from 800,000 metric
tons (mts) to 600,000 mts, now that the private market plays
a more important role in price stabilization; and b) PFDS
auctioning off donations of red wheat (which commands a
higher price on the local market),and delivering only white
wheat varieties to WFP beneficiaries, which IFPRI maintains
that the poor prefer. These are complex recommendations
which will probably require further analysis. End note.

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Comment
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10. (SBU) WFP has a USD 67 million/annum program in
Bangladesh. To combat leakages, they have moved away in part
from whole grain distribution through promotion of atta FOR A/S PRM DEWEY,
IO A/S HOLMES, EUR/NE, EUR/WE,
SA/INS, IO/EDA SKOTOK
USDA/FAS FOR U/S PENN, MCHAMBLISS, RTILSWORTH AND LPANASUK
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE,
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS
BRU


(flour) fortification mills (which produce a readily
identifiable product) in a number of rural areas, with
support from USAID and CIDA; WFP has also launched a
national primary school feeding project using enriched
biscuits which contain the WFP-logo. Yet more needs to be
done to ensure that beneficiaries do indeed obtain their
agreed upon rations. While WFP is to be given due credit for
identifying the problem, given the sizable amounts of
commodity leakage involved, WFP, the GOB and the principal
donors now need to fix what has been well documented (by the
highly-respected IFPRI) to be broken. Every case of
commodity hemorrhaging in today's constrained budgetary
environment has to be swiftly and vigorously addressed.
Bangladesh cannot be the exception to this rule. Hall


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2003ROME03607 - Classification: UNCLASSIFIED