SUCCESSFUL DONOR CONFERENCE GIVES MAJOR BOOST

C O N F I D E N T I A L SECTION 01 OF 07 ISLAMABAD 017267

SIPDIS

DEPARTMENT PLS PASS USAID
MANILA PLS PASS USADB

E.O. 12958: DECL: 11/20/2015
TAGS: EAID ECON PK PREL SENV
SUBJECT: SUCCESSFUL DONOR CONFERENCE GIVES MAJOR BOOST
MUSHARRAF AND U.S. IMAGE

CLASSIFIED BY: DSCG 05/01 JANUARY 2005, EDITION 1, REASON: 1.4(D)


1. (SBU) summary and comment. The Musharraf Government is basking in
the glow of a successful November 19 donor reconstruction conference
that raised $6.0 billion (GOP's current internal figure, as of November
21 evening) in pledges for earthquake reconstruction, comfortably in
excess of both the World Bank/ADB needs assessment
estimate (of $5.2 billion) and the GOP's own estimates of its likely
take going in (closer to $3.5-4.0 billion). The largest pledges at the
conference (preliminary figures including both new commitments and
previously announced commitments) were: World Bank: $1
billion; Asian Development Bank: $1 billion; United States: $510
million; Saudi Arabia: $420-573 million (depending on whether export
credits are included); Islamic Development Bank: $502 million; China:
$326 million; and Iran: $200 million. While most major bilateral
donations came from OECD countries and the Gulf states,
Musharraf made a point of praising the (smaller) donations and
participation of regional neighbors including India, Afghanistan,
Bangladesh, Sri Lanka and Bhutan.


2. (U) President Musharraf outlined a blueprint for reconstruction
that contained: a plan to give cash grants to owners to rebuild their
houses (with guidance to make them earthquake proof); plans to rebuild
and improve the education and health systems in the affected areas; a
GOP initiative to make facilities like schools or hospitals or even
entire villages or tehsils (boroughs) open to "sponsorship" by donors
from within Pakistan and abroad; and an announcement that Pakistan woul
create a permanent volunteer corps to build on the spirit of voluntaris
evident in the earthquake aftermath.



3. (C) The Government of Pakistan (GOP) and media are characterizing
the conference as a tremendous success that reflects how Pakistan's
post-9/11 foreign policy has ended the country's international isolatio
and brought it the support of the rest of the world.
The substantial U.S. contribution of $510 million (which is one of the
two largest bilateral contributions, along with that of Saudi Arabia)
has been singled out for special praise by Musharraf and the media.
Privately, GOP interlocutors from Musharraf and Aziz on down have note
a pledge of this magnitude will do much to change America's
image in Pakistan, while Aziz and others have also thanked us for U.S.
efforts to encourage other donors to make robust pledges.


4. (SBU) In coming days, post will try to obtain the GOP's final
tally of the pledges made at the conference (including trying to
determine where U.S. encouragement for rapid disbursement may be
productive) as well as ascertain further details on the
reconstruction program sketched out by Musharraf at the conference.


5. (C) Comment: the substantial U.S. pledge for reconstruction,
following on the momentum generated by our pivotal role in the
earthquake relief effort, has given us a rare opportunity to reshape
public perceptions of America here in Pakistan, and to
diminish the appeal of extremism more generally. Our efforts have led
to real changes in attitudes and behavior, not just among GOP
interlocutors but also among the Pakistani public and media. Post is
working now on ways we can consolidate and build on those
gains. End comment and summary.

The donor conference: pledges of $6 billion 6.

(U) After a brief introductory video (in which the image of a big
American flag hanging across the interior of a relief helicopter was th
only image of a foreign flag),and brief introductory remarks by
Conference Chair PM Shaukat Aziz and U.N. Secretary General Kofi Annan,
President Musharraf delivered the keynote address, laying
out Pakistan's detailed blueprint for post-earthquake reconstruction.
Among the highlights, he: - Thanked the 75 countries and organizations
represented at the conference, and singled out for special thanks the
participation of India; - Outlined the scope of the devastation (73,00
people died; an equal number seriously injured; 400,000 households
affected, affecting 3.5 million people; an entire generation of
children in the affected areas lost in collapsed schools);
- Praised the quick response of the Pakistani people and army, and
explained that Pakistan had launched a national volunteer movement to
tap into the energy of young Pakistanis who had voluntarily left their
jobs to help with rescue operations;

- Expressed the "deep gratitude of the Pakistani people" to the
foreign participants in the rescue operation, and praised as "massive"
the foreign support to the relief operation;
- Outlined the steps being taken to address the challenges of the
relief operation (logistics, shelter, economy) and updated the "on the
whole satisfactory" progress made to date.
- Explained that in order to restart economic activity to the region,
the GOP would, by the end of November, pump 20 billion rupees ($350
million) in the local economies, giving 100,000 rupees ($1667) to the
next of kin of those killed in the quake, 50,000
rupees ($833) to the seriously wounded; 25,000 ($417) to the less
seriously wounded; and 25,000 ($417) rupees to each of the 400,000
affected households.
- Noted that in the needs assessment agreed by the World Bank, the
Asian Development Bank (ADB),and the GOP, $3.5 billion would be for
reconstruction; $1.6 billion would be to sustain the relief operation
for the coming year; and $100 million would be for rehabilitation
efforts;
- Explained that for the 400,000 homes destroyed or seriously damaged
by the earthquake, Pakistan would use an owner-driven approach, with
each household receiving $3300 dollars to rebuild, and receiving
guidance from military engineers and the new national volunteer corps o
how to make the new homes earthquake proof.
Musharraf noted the GOP's goal would be to complete the reconstruction
of homes by the end of 2006. Given the demand for construction
material, some may be sourced from abroad and paid for by assistance
pledges.
- Explained the GOP would be encouraging sponsorship of specific
reconstruction projects by donors (both within Pakistan and from
abroad). Information on specific projects open for sponsorship would b
available on a GOP website;
- For housing, a village cluster of 100 houses could be sponsored for
$330 K, and for that sum the village would be named after the sponsor
(Musharraf noted the Pakistan still has major cities like Abbotabad and
Jacobabad named after their founders).
Sponsoring home reconstruction throughout an entire tehsil (borough)
would cost $50 million; sponsoring home reconstruction throughout an
entire provincial district would cost $150 million.
- Explained that the GOP would prefer that sponsorship be applied to
health and education facilities. For housing, rather than have direct
sponsorship by donors or self- construction by donors -- both of which
could lead to disparities in housing levels (and/or
unsuitable housing) -- the GOP would prefer that money be contributed
to the President's Relief Fund from which it will be used to finance
owner-driven housing reconstruction.
- Said that the education infrastructure in the affected areas would
be rebuilt in a manner that is modular and earthquake proof, and would
be rebuilt with a goal of universalizing education in the affected area
(this meant the GOP's estimate for the cost of reconstructing the
education system in the affected areas was $614 million, or roughly 30
percent higher than the $472 million figure cited in the needs
assessment);
- Said that for the health sector, rebuilding in line with needs
(rather than simply duplicating the facilities destroyed in the
earthquake) would come to $412 million, or roughly 36 percent more than
the figure cited in the needs assessment (to rebuild earlier
facilities).
- Explained that in order to protect destitute women, the orphaned,
and disabled (the rehabilitation phase),the Ministry of Social Welfare
would create rehabilitation centers modeled on the Ashyana (nest)
project in Hattian, and in order to generate economic
activity there would encourage microfinance (including the Khushalli
Bank of Pakistan) and skill development by NGOs and volunteer groups.
- Appealed to Pakistanis both within Pakistan and throughout the world
to donate generously, sponsoring the reconstruction of facilities or
even "adopting" entire villages, tehsils, or districts. (Later in the
conference it was explained a subsequent donor
conference would be held to raise reconstruction funds from domestic
and expatriate Pakistanis.)
- Assured that the reconstruction plan, and the receipt and
disbursement of funds, would be implemented in a transparent manner, an
be monitored by both external auditors and an oversight committee of
eminent persons. Committees comprised of parliamentarians,
local government and military representatives would oversee local-level
disbursement of funds.
- Appealed to India, "to the government of Indian Held Kashmir ... to
the All Parties Hurriyat Conference and other Kashmiri groups" to work
together to turn the earthquake into an opportunity to improve Indo-Pak
relations and solve the Kashmir dispute. This, he said, could be
"India's donation" to the earthquake relief effort.


7. (SBU). Prime Minister Aziz closed the conference by noting his
quick calculation indicated that pledges of assistance were received fo
$5.4 billion, in excess of the $5.2 billion figure cited in the needs
assessment (and closer to the GOP's own calculation that
rebuilding the health and education systems in the affected areas with
necessary improvements would push the total reconstruction cost to $6
billion). November 20 Pakistani press reports cited a figure of $5.8
billion. These numbers seem to include both new pledges and previous
pledges, as most donors did in their presentations (an
unconfirmed November 21 press report said the conference raised $3.4
billion in new assistance),and include grant and loan assistance; it i
not clear whether all pledges (e.g., export credits, IMF emergency loan
are included in these initial tallies. The GOP's Economic Affairs
Division, which handles foreign assistance issues, is still compiling
final figures, which Embassy will report septel. On November 21
evening, GOP contacts told us their current internal calculation --
still preliminary --is that the pledges made at the conference totaled
$6 billion, of which roughly $3.6 billion were new pledges (and
$2.4 billion were pledges announced previously).


8. (U) Individual donors made the following pledges (NOTE: this
reflects initial numbers committed by delegates to the conference, as
recorded by embassy notetaker and the press, with additional details as
available).
- World Bank (represented by Praful Patel, Vice President, South Asia
region): $1 billion - Asian Development bank (Haruhiko Kuroda,
President): $1 billion;
- United States (USAID Administrator Andrew Natsios): $510 million;
- Saudi Arabia: $593 million (of which $133 million grants, $187
concessional loans, $120 million in private donations, and $153 in
export credits, which are not usually counted as assistance);
- Islamic Development Bank (Ahmed Mohamed Ali, President): $502
million (reflecting an additional $250 million that IDB management will
propose to the IDB board, on top of $252 previously committed);
- IMF (Iqbal Zaidi, Senior Advisor to the Executive Director):
reiterated offer of $375 million loan for balance of payments support
(NOTE: GOP contacts told us this number was not being included in the
final tally of assistance pledges);
- China (Wu Dawei, Vice Minister for Foreign Affairs): press reports
$326 million (of which the majority is a new $300 million concessional
loan);
- Iran (Mohammed Saeedi Kia, Miinister for Housing and Urban
Development): $200 million (in medium term credits);
- Turkey (Mehmet Ali Sahin, Deputy PM and Minister of State): $150
million (appears this was previously announced);
- France (Philippe Douste-Blazy, Minister for Foreign Affairs): $124
million (of which $94 million in new concessional loans on top of $30
million previously announced);
- United Kingdom (Gareth Thomas, Deputy Minister of International
Development): $120 million in new contributions; - Japan (Yasuhisa
Shiozaki, Senior Vice Minister for Foreign Affairs): $120 million
($100 million in new yen loans on top of $20 million in grant aid
previously announced);
- European Commission (Benita Ferrero-Waldner, Commissioner): $110
million in grants (not clear if this figure includes Commission
assistance previously announced);
- Germany (Ambassador Gunter Mulack): $100 million (in a new package
of commitments agreed November 16. This appears to be on top of earlie
contributions of $31 million from the German Government and $24 million
from private donations in Germany);
- UAE (Ali Bin Abdullah Al-Kaabi, Minister for Labor): $100 million
(previously announced);
- Kuwait: $100 million (previously announced);
- Netherlands (Ambassador Willem Andreae): has pledged over $72
million so far, and will consider additions to that when Development
Minister visits Pakistan in two weeks;
- Norway: $70 million (Government will ask Parliament for an
additional $35 million on top of $35 already spent; will also consider
debt swap).
Other countries announcing contributions included: Indonesia;
Azerbaijan, Australia (which will announce a new assistance package
during Prime Minister Howard's upcoming visit); Jordan; Bangladesh ($2
million); Afghanistan; India (re-affirmed Geneva pledge of $25 million
in export credits); Ireland; Italy; Malaysia (additional $1
million on top of 3.3. million in cash and kind previously pledged);
Cuba, Sweden (additional $20 million in grants over three years on top
of $25 million already pledged);
Korea; Morocco; Thailand (additional $300 K on top of previous
commitment of $250 K); Denmark ($18.5 million total to date, and
considering more); Switzerland ($40 million over five years, plus
several million in private donations from Swiss citizens);
Bhutan; Czech Republic; Spain; Singapore; Canada; Greece.

The reaction: praise for Musharraf, Aziz ... and the United States



9. (C) The GOP has publicly termed the conference a big success, and
has privately told us they were elated by the strong showing since they
went into the conference knowing of only $3.5 billion in pledges.
President Musharraf was quoted as telling the press the
results showed Pakistan enjoyed the respect of the world community, was
not in isolation, and would be receiving help from around the world to
help rebuild. At his luncheon following the conference, Musharraf said
(this was subsequently released to the press): "I would be remiss if I
did not single out some countries who have been particularly generous.
And in this, I would like to pinpoint two countries who have
exceeded $500 million dollars, that is, the United States of America
and Saudi Arabia. We are extremely grateful to these countries for
contributing so much to us." (Musharraf also singled out for thanks
countries that pledged more than $100 million -- the United
Kingdom, German, UAE, Kuwait, and European Union/Commission -- and the
World Bank, ADB and Islamic Development Bank.) At the luncheon,
Musharraf privately asked the USDel to express thanks to President Bush
and said U.S. generosity at the conference would have a lasting positiv
impact on America's image in Pakistan in a way that an incremental
approach would not have. Prime Minister Aziz also thanked the
USDel for the significant U.S. pledge, which he said helped set the
tone for the entire conference, and he also expressed appreciation for
U.S. efforts to encourage other donors (the Japanese delegation and ADB
delegation each also noted that U.S. encouragement had been helpful to
efforts to strengthen their contributions).


10. (U) Media reaction to the November 19 conference has been
uniformly positive, both for the GOP and for the United States. In a
November 20 editorial, the Dawn (Pakistan's leading English language
daily) said the conference resulted in "an encouraging pledge of $5.8
billion ... [which] should serve to cheer up a government that
had been fighting with its back to the wall and facing intense
criticism from the opposition [for slowness of relief operations]," and
stated "The U.S. is the single biggest donor country, having increased
its contribution to $510 million (including money already given)."
[NOTE: the Dawn editorial reported the Saudi contribution as $391
million, which apparently leaves out the $153 million in export credits
and some other part of the Saudi aid package.] The November 20 "The
News" had the front-page headline "PM basks in 'foreign policy success'
and quoted PM Aziz as saying the conference results demonstrated that
"The foreign policy being pursued by President General Pervez Musharraf
has started showing results;" other articles in the News called
the Saturday conference "a celebration of Pakistan's foreign policy."
On November 21, the Daily Times had an editorial (headline: "World
Rallies around Pakistan") noting the earlier decision of opposition
parties' (ARD and MMA) to stay away from the conference, said there was
"definitely an incomprehensible sense of dismay in thE
opposition camp at the success of the government to get the world
together." The editorial continued, "In the final tally of aid pledges,
there are a few surprises for the pessimists and for those who think
that Pakistan's post-9/11 foreign policy has isolated
the country instead of bringing it in tune with the rest of the world.
The U.S., together with Saudi Arabia, is at the top of the list of
countries in bilateral pledges.... The American pledge of half a billio
dollars has come in the wake of opinion surveys in Pakistan saying 90
percent of the respondents hated President Bush and loved Osama bin
Laden and that Al Qaeda was not responsible for 9/11 attacks."


11. (U) The Urdu press has been equally upbeat about the donor
conference results. The leading mass circulation daily "Jang" in a
Monday editorial called the conference results "not only testimony of
the success of the efforts of President Musharraf and PM Shaukat
Aziz but also a reflection of trust in the government's efforts for the
rehabilitation" of quake-affected areas and people. The second highest
circulation daily "Nawa-e-Waqt" noted "Among those provided the most ai
are the World bank, Asian Development Bank, America and Saudi Arabia."
A Monday editorial in the Urdu daily "Din" stated "It is worth
mentioning here that the U.S. increased its assistance three-fold,
raising the final figure to $510 million out of which 300 million would
be provided in cash." The populist Urdu daily "Khabrain" stated in a
November 21 editorial, "The international community's response has been
beyond Pakistan's expectations. Undoubtedly, President Musharraf
and PM Aziz deserve praise for organizing this conference, although
some circles in Pakistan were creating the impression that the
international community was not interested in helping Pakistan." The
center-right daily "Pakistan," in a November 21 editorial, said
"America has announced the most aid in the Donors Conference, which is
approximately $510 million. American Congress had urged the
Administration to increase it to one billion.... The Government can
rightly feel proud of the outcome of the conference...
America and its allies have lent wholehearted support to their ally
Pakistan; it is also a reflection of the confidence reposed in Presiden
Musharraf."


12. (SBU) By November 21, print media had begun to give some space to
(inside) stories reporting opposition parties' criticism that the donor
conference has not been as great a success as asserted since much of th
assistance is being provided in the form of loans, which will ultimatel
increase Pakistan's debt burden (Note: no individual country's
assistance is referenced in these stories. It is post's
understanding that the U.S. $510 million aid package is likely to be al
in grants or in-kind).

Next steps



13. (SBU) In the coming days, post will try to obtain the GOP's final
tally of the pledges made at the conference (including trying to
determine where U.S. encouragement for rapid disbursement may be
productive). Post will also try to obtain further details on the
reconstruction program sketched out by Musharraf at the conference, and
try to pinpoint how the various components of the U.S. assistance pledg
(USAID funds and programs, DOD support, and private sector financing)
can be most effective.
CROCKER