IRISH RESPONSE TO DEMARCHE ON UNHELPFUL ODA

UNCLAS SECTION 01 OF 02 DUBLIN 001260

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: EAID EFIN ECON EINV PREL
SUBJECT: IRISH RESPONSE TO DEMARCHE ON UNHELPFUL ODA
INITIATIVES

REF: STATE 177369


1. Summary: Ireland is skeptical of innovative financing
mechanisms for Official Development Assistance (ODA),such as
the International Financing Facility and global taxation
schemes. The Irish Government, however, has not been public
about its skepticism, due to diverse opinions among EU Member
States on such mechanisms. GOI development officials would
appreciate Department guidance on how the USG intends to
coordinate with other donors in African countries eligible
for Millennium Challenge Account assistance. End summary.


2. On August 24, Post delivered reftel talking points to
Frank Sheridan and Thomas Haney, Counsellors for Programme
Countries and Multilateral Assistance, respectively, in the
Development Corporation Ireland (DCI, the Department of
Foreign Affairs (DFA) division responsible for GOI foreign
assistance). Julian Clare, First Secretary in the DFA's UN
Section, also participated.

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Ireland Increasing ODA, But Skeptical of IFF
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3. Ireland shares U.S. commitments to economic development
and sees conventional forms of Official Development
Assistance (ODA) as the primary mechanism to redress poverty,
observed Haney. He noted that Irish ODA had doubled since
2000 to reach 0.4 percent of GNP. The GOI planned further
increases in ODA, but was uncertain of attaining an ODA level
of 0.7 percent of GDP by 2007, in keeping with Millennium
Declaration commitments made by Prime Minister Ahern. (Irish
GNP is noticeably lower than GDP, given significant
productivity by foreign-owned firms in the high-tech sector.)
Haney said the GOI had taken serious note of UN assessments
that an additional USD 50 billion in ODA per year was
required to achieve Millennium Declaration goals,
particularly in Africa. The GOI's impression, he added, was
that Africa has slipped several notches on the U.S.
development agenda, given onerous U.S. commitments in Iraq
and Afghanistan.


4. Like the USG, the GOI was skeptical of innovative
financing mechanisms for ODA, such as the International
Financing Facility (IFF),observed Haney. He said that such
proposals were well-intentioned, but failed to address
important questions, including how IFF-issued bonds would be
repaid. More importantly, the IFF proposal distracted
countries from their Millennium development commitments to
raise ODA levels. Haney said that the GOI would not publicly
oppose the IFF proposal, given diverse opinions among EU
Member States on the subject. He mentioned that the UK,
France, and Sweden supported the IFF idea, while Germany and
the Netherlands saw the proposal as adding additional
complexity to ODA financing. Haney believed that any
statement by the EU Presidency on the IFF would be a
lowest-common-denominator pronouncement urging further
reflection on the proposal.


5. The UK had specifically pressed Ireland to make funding
commitments to an IFF-like pilot project in 2005 for
financing vaccines, noted Haney. HMG planned to develop the
project with the Global Alliance for Vaccines and
Immunization (GAVI),an international coalition of public and
private partners that is funded primarily by the Bill and
Melinda Gates Foundation. According to Haney, the GOI had
promised to consider the UK's offer, but would likely not
participate, due partly to uncertainty about GAVI's role. He
added, however, that the GOI would not come out publicly
against the proposal.

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Skepticism on Taxation
--------------


6. Ireland was even more skeptical of global taxation
schemes as ODA financing mechanisms, said Haney. Sheridan
explained that such schemes would only work if accepted by
all major economies, which would require impossibly long
negotiations and cross-border harmonization of tax policies.
He noted that the Irish Department of Finance viewed tax as a
sovereign issue and would thus oppose moves toward
harmonization. Moreover, proposed global tax schemes had not
clarified the mechanisms for channeling collected revenues to
developing countries. Sheridan argued that global taxation,
like IFF proposals, acted as an "escape valve" to divert
international attention from commitments to increase ODA
levels in accord with the Monterrey Consensus.

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President Lula's World Leaders Meeting
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7. Haney and Sheridan expected that Prime Minister Ahern
would decline the invitation to participate in President
Lula's September 20 World Leaders Meeting on Financing Hunger
and Poverty Eradication. The GOI would likely send a
Department of Foreign Affairs (DFA) representative, though it
was unclear who. Sheridan pointed out that Prime Minister
Ahern planned to appoint a new Foreign Minister in an
anticipated September Cabinet reshuffle, which would affect
the availability of DFA personnel for the World Leaders
Meeting. Whoever attended, said Haney, would take part in a
listening mode only. He added that Ireland saw the meeting
as an attempt to influence subsequent UNGA discussion on
Millennium development goals, perhaps even to press for a
UNGA resolution on innovative ODA financing mechanisms. A
UNGA resolution of this sort would be problematic for
Ireland, since it would force the GOI to make public its
opposition to IFF-like proposals.

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Coordination on MCA Assistance
--------------


8. The GOI had questions as to how Millennium Challenge
Account (MCA) assistance would affect ongoing Irish
development programs in Lesotho and Mozambique, two countries
identified as eligible for MCA funds, said Sheridan. The
GOI, for example, had funded education projects in Lesotho
for 30 years, but had had difficulties working with the
Lesotho Government to make the projects successful. Sheridan
noted GOI concerns that a significant injection of MCA funds
into Lesotho would be a "welcome distraction" for the
Government from other donors' existing programs. He said his
impression was that the USG had left MCA-eligible countries
to drive the process of identifying projects for funding,
allowing recipient governments to focus on large
infrastructure programs. Sheridan mentioned Lesotho's
possible plans to use MCA assistance for an earlier conceived
water project that had serious environmental implications.
He asked whether Post could clarify how the USG intended to
coordinate with other donors in MCA-eligible countries.


9. Comment: Post would appreciate, via e-mail to econoff Joe
Young, any general guidance from MCC or EB/IFD that we could
provide to Sheridan and Haney on the coordination issue,
particularly with regard to Lesotho and Mozambique, if
possible. Alternatively, it would help if we could suggest a
contact point in MCC or EB/IFD with whom the Irish Embassy in
Washington could follow up. Sheridan mentioned vaguely that
his office had made an unsuccessful attempt to engage the
State Department in 2003 on development questions.
KENNY