WFP SCHOOL MILK PROPOSAL FOR CHINA

UNCLAS ROME 002969

SIPDIS


FROM U.S. MISSION TO THE UN AGENCIES IN ROME

AMEMBASSY BEIJING FOR AMBASSADOR RANDT
USDA/FAS BEIJING FOR MINISTER COUNSELOR MAURICE HOUSE
STATE FOR IO A/S HOLMES, EAP/CM
USDA/FAS FOR U/S PENN AND MARY CHAMBLISS
USAID FOR DAA/DCHA GRIGSBY
NSC FOR JMELINE

E.O. 12958: N/A
TAGS: EAID AORC PREF EAGR CH WFP UN
SUBJECT: WFP SCHOOL MILK PROPOSAL FOR CHINA


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Summary
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1. WFP plans to phase out its operations in China at the end
of 2005, and remains hopeful that China will become a major
food aid contributor in the future. In 2001, WFP approached
USDA related to a one-time 100,000 metric ton donation of
Dry Skimmed Milk powder to support Chinese school feeding
efforts in Western China 2002-2007. In 2003, a request for
10,000 mts of milk powder was made, again to support school
feeding. The requests were turned down due to inability to
find funding to pay support costs on a development project.
In Mission's view, as we enter the "home stretch" on WFP
efforts in China, school feeding may be a good legacy to
leave behind. End summary.


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Background
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2. While China has achieved remarkable economic growth over
the past two decades, wide regional disparities in income
and living standards persist, leaving the central and
western provinces significantly poorer than the coastal
regions. There still remain an estimated 100 million poor
people in China living on less than US $1 dollar a day.
Poverty is most acute in remote and mountainous areas,
predominantly populated by ethnic minorities.


3. WFP is presently operating its CY 2001-2005 Country
Program (CP),which the Executive Board approved in February

2001. The main objectives of the CP are:

-Focus on food-insecure minority communities in China's
western provinces;
-Integration of targeting and M&E (monitoring and
evaluation) to demonstrate results of food assistance;
-Focus on activities which contribute to closing the gender
gap;
-Move away from large-scale agricultural sector
infrastructure works in favor of investment in human
capacity (training, education) and asset creation under
community or individual control;
-In view of a gradual phase out of development assistance:
increase GOC contributions to WFP - transfer food assistance
capacity and approaches to the Government of China (GOC).


4. WFP's activities in China are aimed to bring about
sustainable improvements in food-security to some 5.2
million of the poorest people in the country. The
corresponding WFP food requirement over the five-year period
amounts to 546,000 MT of wheat, valued at US$86 million.
After three-and-one-half years of operations the program is
resourced at 197,145 mts (none from the United States),36
percent.


5. In view of the serious resourcing shortfall of its
Country Program, WFP has renewed its request for a
contribution of 10,000 MT of Dry Skimmed Milk powder (DSM)
for its activities in China. After discussion with
Government of China (GOC),it is suggested that the DSM be
exchanged for wheat to be released from GOC stocks and made
available to WFP CP activities. The milk powder itself would
be used in the school feeding effort. Exchange mechanisms
with wheat from GOC warehouses in the project areas have
been successfully carried-out in the past. Its main
advantage is that it reduces the internal transport and
handling costs, which are borne by the GOC. Based on the
ratio of WFP cost for the two commodities, the GOC will make
available 200,000 MT of standard quality wheat in exchange
for 10,000 MT of DSM. The GOC also agrees to bear the cost
of ocean freight as well as all costs related to the
internal transportation of the wheat equivalent to the final
distribution point.

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Comment from Ambassador Hall

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6. I would like to see China become a major donor to WFP. A
timely U.S. donation of milk powder is a win-win
proposition, especially given China's offer to pay for the
transportation costs. It will help WFP garner more commodity
support for its Country Program, thus helping WFP to leave
China at the end of 2005 on the high note that it met its
commitments. This in turn will engender an excellent climate-
of-opinion in WFP's dialogue with China becoming a major
donor in the future. Hall


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2004ROME02969 - Classification: UNCLASSIFIED