1. U) This is an action message.



2. (U) Embassy Djibouti requests State and USAID agreement
to transition the USAID program in Djibouti from primary
reliance on Economic Support Funds (ESF) to Development
Assistance (DA) funding over the next two years with an
initial modest DA program of two to three million dollars.
A shift to a modest DA program, in addition to annual ESF
allotments available, will help solidify relationships with
the Government of the Republic of Djibouti (GORD), insure a
more reliable and steady stream of funding and facilitate
achievement of realistic development objectives.



3. (U) Cooperation on the war on terrorism continues to be
the foundation of the strong partnership between the U.S.
and the Government of Djibouti. The USAID development
program strengthens that partnership but the uncertainties
of ESF levels from one year to the next raises doubts among
GORD leadership about the durability of our partnership.
Widely fluctuating ESF levels also make it difficult to
plan and implement a coherent and effective program. This
year, for example, ESF levels were initially pegged at $8
million, then reduced to $5 million and finally allocated
at less than $2 million. Post appreciates the pressures on
ESF worldwide, but Djibouti's genuine needs, and the
resulting benefits we derive from our close relationship,
mandate a look at alternative sources of development
assistance.



4. (U) With its small population, proven stability, peace
and seemingly decent per capita income by African
standards, it is easy to overlook Djibouti's real needs.
The truth is most of the population is desperately poor and
social development indicators are among the worst in the
world. Unemployment is 60% and more than 60% of adults
cannot read or write. Infant and under-five child
mortality is high at an estimated 114 and 165 per 1,000
live births, respectively. The rate of maternal mortality
is one of the highest in the world. Over 45% of the
primary school age population does not attend school. Life
expectancy is only 46 years. Djibouti is ranked 157 among
174 countries on the United Nations Development Program's
Human Development Index.



5. (U) With no natural resources, and no agricultural land
to speak of, Djibouti has only its people, strategic
location and stability to form a foundation for economic
development. National institutions are very weak with
poorly educated staff and poor work habits. The country
lacks a university to train graduates to fill key
positions. The cost of living is very high as almost
everything is imported. USAID and the Embassy are working
in partnership with the Government of Djibouti to overcome
these obstacles and implement the government's vision of
transforming the country into a hub for trade in the Horn
of Africa and the Middle East. USAID is supporting the
government's reform efforts with its education, health and
food security programs, with impressive results to date.
However, the achievement of extended impact on the quality
of the lives of people will take a long-term commitment of
USG resources. A transition to DA funding will help ensure
such a commitment.



6. (U) Assurance of DA funding would enable sound strategic
planning over the medium term, which is valuable for making
investment choices among Djibouti's many development needs.
With limited funds it's impossible to meet all the GORD's
myriad requests for assistance, but planning would enable
us to select priorities where we can best promote USG
interests and have the greatest impact.



7. (U) For instance, it is clearly in the USG's interest to
do more to support political stability and democratic
development in Djibouti. The government has already
expressed an interest in judicial sector reform and in
improving its human rights record with the United States.
The recently completed IRI/IFES pre-election assessment
points out the need for constitutional and electoral law
reform to facilitate healthy dialogue between the ruling
party and the opposition. Djibouti needs to develop a
culture of civil society participation in all areas. While
not possible to address all these needs, a DA-funded USAID
program, with a longer-term development horizon, would
permit appropriately planned and focused
democracy/governance assistance in these critical areas.



8. (U) Mission would appreciate Department and USAID's
early feedback on this request.
RAGSDALE