IRAQ: ITALIAN PLANS FOR TOKYO DONORS' MEETING

UNCLAS ROME 003590

SIPDIS


SENSITIVE

STATE EB/ODF (DE MARCELLUS)
STATE FOR E

E.O. 12958: N/A
TAGS: EAID ECON EFIN PREL IT IZ IRAQI FREEDOM
SUBJECT: IRAQ: ITALIAN PLANS FOR TOKYO DONORS' MEETING

REF: A. SECSTATE 196084

B. ROME 2902

C. ROME 2050

D. ROME 1805

This cable is Sensitive But Unclassified. Please protect
accordingly; not for Internet publication.


1. (SBU) Summary: Italy may not be able to make its planned
Euro 10 million disbursement to the International
Reconstruction Fund Facility for Iraq (IRFFI) prior to the
Tokyo meeting due to chronic budget difficulties. Our
judgment is that this is a matter of timing, and that the
2004 pledge is not in fundamental jeopardy. The government
does, however, plan to announce a new pledge to provide
election-related assistance, though Italian authorities have
yet to decide on a figure. When the disbursement is made,
Italy will earmark much of its IRFFI pledge for United
Nations Industrial Development Organization (UNIDO) projects
related to cottage industry development, small-and-medium
enterprise, and agro industry rehabilitation. Embassy will
continue to press for disbursement at senior levels in the
run-up to the Tokyo conference. We also think this issue is
suitable for any high-level bilateral discussion with Italian
Finance Minister Siniscalco on the margins of the up-coming
Fund and Bank meetings. End summary.


2. (U) Econoff presented ref A points to Gianni Ghisi, Deputy
Director General for Development Cooperation at the Ministry
of Foreign Affairs, and Luigi Maccotta, Deputy Director of
the MFA's Iraq Task Force. Ghisi will lead the Italian
delegation to the Tokyo donors conference, which will also
include Maccotta and perhaps one additional official from
Italy's Finance Ministry. Ghisi plans to attend the G-8 head
of delegation meeting on October 12. (Note: Embassy will
double track these points in a meeting September 22 with
Carlo Monticelli, Senior Director for G-7 and EU Affairs at
the Finance Ministry, and will report any substantive
response septel. End note.)

Italy Still Trying to Disburse E10 Million to IRFFI
-------------- --------------


3. (SBU) Ghisi said Italy has not yet managed to disburse its
planned Euro 10 million ($12.2 million) donation to the
IRFFI. Many of the MFA's development assistance accounts
were frozen over the summer as the Italian government debated
mid-year cuts to the 2004 national budget. The MFA's aid
budget has, our MFA contacts assure us, escaped any cuts this
year, but the Italian Parliament and the Finance Ministry
have yet to officially unfreeze the money. Ghisi and
Maccotta expressed optimism that Italy would disburse the
IRFFI donation prior to the Tokyo meeting, but acknowledged
that there is a possibility they might miss this deadline due
to further bureaucratic delays.


4. (SBU) (Note: The second part of Italy's 2004 Madrid pledge
disbursement will come in the form of a Euro 20 million
bilateral soft loan to the Interim Iraqi Government. This
loan also still awaits disbursement due to budget
difficulties, though Ghisi said he is confident the funds
would be transferred to Iraqi authorities by the end of the
year. End note.)

Italy's IRFFI Pledge To Support Cottage and Agro Industry
-------------- --------------


5. (U) Ghisi said Italy would earmark the bulk of its IRFFI
contribution for three UNIDO projects: $5 million for a
program to develop cottage industries in southern Iraq; $2.8
million towards the rehabilitation of a dairy plant; and $2.8
million for a project to promote small and medium
enterprises. Ghisi said Italy may also contribute Euro
200,000 to a planning survey of Iraq's agro industry
reconstruction needs.

Additional Support for Elections
--------------


6. (U) Maccotta told Econoff Italy hopes to make an

additional donation for election support. While Maccotta
said the government had yet to decide on an amount, much of
the support will likely come in the form of election-related
training to take place in Italy.

Delegation Will Report on Other Bilateral Assistance
-------------- --------------


7. (U) The Italian delegation also plans to present an update
on additional bilateral humanitarian and reconstruction
assistance beyond the IRFFI donation and the bilateral soft
loan. Maccotta said he plans to report on the contribution
of Italy's military contingent to reconstruction in and
around Nasiriyah, including the rehabilitation of schools,
hospitals, and other public facilities. Ghisi and Maccotta
will also update donors on several bilateral projects,
including Italy-funded programs to rebuild the Bukhme Dam, to
restore marshlands, and provide Iraqi ministries with a basic
"e-government" intranet system. (Note: The Euro 10 million
"e-government" project (ref C) is now moving forward after
several months of security-related delays. End note.)

Italy's IRFFI Contributions to Remain Steady in 2005
-------------- --------------


8. (U) Looking towards next year, Ghisi said the MFA would
likely maintain a similar level of Madrid pledge
disbursement's in 2005--i.e., another Euro 10 million
contribution to the IRFFI plus an additional bilateral soft
loan to Iraq of around Euro 20 million.

Comment
--------------


9. (SBU) Our MFA contacts are frustrated with the spending
freeze and the consequent delay it has created in fulfilling
Italy's pledge to the IRFFI. Given the slow speed of the
Italian bureaucracy, there is a distinct chance that Italy
will not make its payment prior to the Tokyo conference. In
our judgment, however, the 2004 pledge is not in fundamental
jeopardy. The Italians view Tokyo as an opportunity to
inform other donor countries about the totality of the
Italian contribution to Iraq, including the substantial
reconstruction and humanitarian work undertaken by the
Italian military. End comment.

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2004ROME03590 - Classification: UNCLASSIFIED