WORLD BANK PLANS FUNDING SHIFT IN DRC

C O N F I D E N T I A L KINSHASA 000911

SIPDIS

E.O. 12958: DECL: 05/22/2015
TAGS: ECON EMIN EFIN EAID SENV CG
SUBJECT: WORLD BANK PLANS FUNDING SHIFT IN DRC

Classified By: EconOff Wendy Brafman, for reasons 1.4 b/d.


1. (C) Summary. World Bank (WB) representative Pedro Alba
told emboffs that the Bank intends to shift its funding in
the DRC from emergency rehabilitation projects to sectoral
projects. The Bank is considering providing support for
Rwanda's gas exploitation of Lake Kivu, but will insist that
Rwanda first discuss this project with the DRC. The DRC and
Rwanda have asked the Bank to mediate in any discussions that
arise regarding this project. The Bank is working with the
DRC to improve the process of paying demobilized Congolese
combatants. It has not transferred any WB money to the DRC's
Social Fund, and would support removal of the current Social
Fund director. End Summary.

Lake Kivu Gas Exploitation
--------------


2. (C) Charge, PolCouns and EconOff met with Pedro Alba,
Washington-based WB Country Director for South-Central Africa
and Great Lakes on May 19. Alba first raised Rwanda's
interest in exploiting natural gas in Lake Kivu and Rwanda's
contract for this purpose with a private enterprise, DANE
Corporation. Since two-thirds of the lake belongs to the
DRC, Alba agreed that Rwanda must inform the GDRC of its
intentions to proceed with the project. He stated that the
Bank would only provide funds if Rwanda reaches a
satisfactory agreement with the GDRC on gas extraction, and
that funding would include an environmental assessment of
Lake Kivu. Alba said that both Rwanda's and DRC's Ministers
of Energy asked him to serve as intermediary in any talks
between the GDRC and Rwanda on this matter.

World Bank Funding Plans
--------------


3. (C) Alba said that a new Resident Representative,
Jean-Michel Happi, will begin his duties June 1, replacing
Onno Ruhl, who left the DRC in May. Alba noted that the Bank
wants to shift from funding ad hoc emergency projects in the
DRC to planned sectoral projects, particularly in the areas
of health, education and transport. Alba anticipates a more
tense relationship between the Bank and the DRC because
projects will increasingly focus on accountability and
capacity building. Alba said the Bank will be more active in
mining, forestry, public expenditure management and civil
service reform, including improving the salary disbursement
process. He said these operations should commence during the
funding period July 2006 - June 2007. He also noted that the
Bank is not comfortable with direct budgetary disbursement to
the DRC and will continue to fund projects directly.


4. (C) Emboffs asked about the Bank's current plans in
support of the Demobilization, Disarmament and Reintegration
(DDR) process. Alba said that the Bank will sign an
agreement with the DRC that aims to implement a new system to
pay ex-combatants. It will increase its DDR staff in the DRC
and will look for ways to assist with funding transport of
demobilized, disarmed combatants. Alba noted that, while the
Bank wants to fund projects that employ demobilized
combatants, it is difficult to find longer-term projects that
can effectively utilize unskilled labor. He also said it
would be difficult to require that contracts with
implementing entities contain contractual provisions that
require hiring ex-combatants.


5. (C) Alba said that the Bank had not yet released any of
the USD 60 million it had allocated for the DRC's Social Fund
because the DRC's Vice Presidents do not support the Fund's
activities, which they see as too politically weighted in
President Kabila's favor. Also, the Bank (along with other
donors) has concerns about the Social Fund director and would
support her removal.

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


6. (C) Alba said the Bank shares the IMF's concerns about
recent overspending, particularly on official travel. He
noted that macroeconomic indicators seem to be stabilizing
after significant declines that began in late 2004. The Bank
is waiting for the IMF's Fifth Review assessment, and hopes
it will be positive enough to enable the Bank to resume
disbursements this year. End Comment.
MEECE