MALDIVES: GOVERNMENT FUND EFFECTIVE MECHANISM FOR

UNCLAS SECTION 01 OF 02 COLOMBO 000704

SIPDIS

DEPARTMENT FOR SA, SA/INS
NSC FOR DORMANDY

E.O. 12958: N/A
TAGS: EAID ECON PREL MV
SUBJECT: MALDIVES: GOVERNMENT FUND EFFECTIVE MECHANISM FOR
USG TSUNAMI RELIEF ASSISTANCE

REF: COLOMBO 677


1. Summary: During Ambassador Lunstead's April 7 meetings
with Maldivian officials, several details regarding tsunami
assistance funding in Maldives emerged. The government's
National Fund and the UNDP are the two major funding
mechanisms available for USG aid. The National Fund appears
well organized, with financial officials emphasizing their
willingness to work with individual donors on specific
conditionalities and monitoring requirements. The UNDP also
has well-developed rehabilitation plans and is working in
conjunction with the government and the National Fund to
ensure programs are fully funded and implemented. After our
discussions with the government, the National Fund looks to
be an effective vehicle for USG assistance. End Summary.

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Limited assistance options
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2. In separate meetings with Government of Republic of
Maldives (GORM) and UNDP officials, the following points
regarding funding options for Maldives became clear:

-- USG assistance can be directed to the GORM's National Fund
(formerly Trust Fund),with earmarks and other conditions;
-- USG assistance can be provided to UNDP/Maldives;
-- Other UN agencies, e.g. UNICEF, and international Red
Cross organizations and the International Federation of the
Red Cross are oversubscribed; and
-- No other international NGOs have long-term programs in
Maldives.

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Assistance through the government fund
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3. During his meeting with the Ambassador, Finance Minister
Mohamed Jaleel underscored the flexibility and accountability
aspects of the government's National Fund. For example,
Jaleel said, GORM officials worked with Japanese government
officials to establish specific conditions and earmarks for a
Japanese donation to GORM's fund. He noted that the
oversight board for the National Fund was not considered a
"trustee," because board members would be in a supervisory
position only, not authorized to make decisions on where or
how the money is spent. (Note: The ADB is contributing its
assistance through the GORM's National Fund, but it is not
clear whether there will be earmarks or conditions on the
donation.)


4. Although the GORM is only now finalizing a Public Finance
Responsibility bill, Jaleel emphasized that the Fund was
already operating under the guidelines the bill would
recommend. He also said that operating principles for the
National Fund were in accord with UN standards for best
practices and that the Fund would have both internal and
external auditors.


5. Explaining that the government was also concerned with
the equitable use of relief funds, Riluwan Shareef, Executive
Director at the Finance Ministry, said that his colleagues
regularly analyze matrices that illustrate relief financing
and programs, by sector, to identify any gaps in aid
distribution. Shareef added he would engage with UNDP to
increase government capacity for managing the relief work.

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Assistance through UNDP
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6. Ambassador met with Patrice Coeur-Bizot, UNDP Resident
Representative. Coeur-Bizot said that separate from other UN
agencies, which are oversubscribed for tsunami assistance,
UNDP is pursuing five tsunami redevelopment programs, which
are not yet fully funded. As a stand-alone program, one is
designed to provide coordination and support to enable
Maldivian agencies to strengthen capacity in managing
assistance funds and government redevelopment programs. A
second program is to help the GORM in the area of disaster
risk management, including the development of an internal
warning system.


7. The remaining three programs -- shelter, livelihood, and
infrastructure -- have been combined under the "Adopt an
Island" initiative. The program is being marketed to both
public and private sectors, with two funding modalities:
through UNDP or directly as an earmark to the GORM's National
Fund. UNDP is working with two implementing methods, one in
which UNDP subcontracts the work, the second in which the
GORM identifies sites for a specific project. UNDP officials
are welcoming both cash and in-kind contributions for the
Adopt an Island initiative. For example, with one recent
"adoption," the local Banyan Tree resort offered its workers
and laborers to rebuild homes on a nearby inhabited island
and UNDP provided the materials and regular monitoring of the
site. Ninety-five percent of the homes on the residential
island have been rebuilt. In a separate "adoption," the
government of Turkey provided assistance to the National
Fund, earmarked for a rebuilding project identified in
conjunction with the GORM and UNDP.


8. Ambassador asked Coeur-Bizot if he was concerned about
possible involuntary relocation, given the GORM's plan to
relocate many residents to "safe islands." Coeur-Bizot said
that he was alert to the issue and was bringing in a
relocation officer to deal specifically with that issue.


9. Coeur-Bizot said that a team of auditors from
Deloitte-Touche was coming the following week to review the
UN's operations and financial handling. By default, this
would also involve some review of GORM financial management,
he added.

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Comment
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10. After continuous and extensive discussions with the
government, the National Fund looks to be an effective
vehicle for additional USG assistance. Government officials
understand the high visibility of the Fund and the high
importance of guaranteeing that the aid is managed in a
transparent and accountable manner. They are willing to work
with donors like the U.S. to meet any particular needs they
may have. The government feels confident in its ability to
make the fund successful in financing equitable
redevelopment. After discussions with government officials,
from President Gayoom to the Finance Minister, the Embassy is
also confident that USG supplemental tsunami reconstruction
assistance can be directed to the Maldivian Government's
National Fund. End Comment.

LUNSTEAD