NEW FOCUS FOR CANADA'S DEVELOPMENT ASSISTANCE

UNCLAS SECTION 01 OF 06 OTTAWA 001522

SIPDIS

STATE FOR WHA/CAN

E.O. 12958: N/A
TAGS: EAID ECON PGOV SENV CA
SUBJECT: NEW FOCUS FOR CANADA'S DEVELOPMENT ASSISTANCE

REF: A. OTTAWA 1282 NOTAL (ISP ON TRADE)

B. OTTAWA 1190 NOTAL (ISP ON NORTH AMERICA)

C. OTTAWA 654 NOTAL (DEBT RELIEF)

D. OTTAWA 324 NOTAL (DEBT RELIEF

E. COMMISSION FOR AFRICA)


1. Summary: Canada is focusing its official development
assistance (ODA) dollara and will be weaning 130 countries
from its bilateral aid programs. The April 19 International
Policy Statement (IPS) confirms that Canada, will concentrate
its development assistance dollars on countries that can use
it most effectively. Aid will focus on five sectors the GOC
considers essential to meeting the Millennium Development
Goals (MDG) and that it believes Canada can support most
effectively, and all programs will be designed with an eye to
promoting gender equality. Within five years, CIDA would
like 67% of bilateral aid to go to 25 "development partners"
as programs in other countries are phased out.


2. Although the Prime Minister reiterated the GOC's
decades-old goal of reaching an official development
assistance (ODA) level of 0.7% of GNI, from about 0.26% now,
the GOC has not set a target date. The new policy statement
should make it easier to identify areas of bilateral
cooperation with Canada's International Development Agency
(CIDA). End Summary.

More aid money
--------------


3. The Development section of Canada's April 19
International Policy Statement (IPS) contained few surprises
but attracted a surprising amount of (mainly) positive
publicity. Minister Aileen Carroll described the IPS to a
Senate committee on May 11 as an "exciting process" and an
"excellent piece of work," that identifies a niche that
allows CIDA to truly make a difference in the world. The
IPS, initiated by Paul Martin on taking office in November,
2003, confirmed that Canada will continue to increase aid
levels by 8% a year and still plans to double aid to Africa
by 2008-09 (from 2003-04 levels).


4. Speaking before the Senate Foreign Affairs Committee,
Minister Carroll explained that the IPS, in addition to
continuing the commitment to increase aid levels by 8% a
year, will accelerate that growth as the fiscal situation
permits. Note: Refs A & B described other elements of the
four-pronged IPS. The text of the policy statement is
available on CIDA's website (among other locations) at
www.acdi-cida.gc.ca . End note.

Focus on five sectors and a theme
--------------


5. The IPS introduces a "development partner" paradigm and
specifies five sectors on which Canada's ODA will be
concentrated. All ODA will have the cross-cutting theme of
promoting gender equality.

The sectors of focus are:
-- good governance,
-- health (with a focus on HIV/AIDS),
-- basic education,
-- private sector development and
-- environmental sustainability.

The sectors were selected because they:
-- advance the Millennium Development Goals;
-- support developing countries' expressed needs and
priorities; and
-- are areas in which Canada and Canadians can "add value."


6. To support good governance, CIDA will draw on the new
Canada Corps, created to "involve Canadians of all ages and
backgrounds," in partnership with NGOs and the private
sector, to increase engagement in "governance interventions
abroad." The private sector development effort, which is
relatively new to CIDA, will follow up on the March 2004
Martin-Zedillo report (the Commission on the Private Sector
and Development). Environmental sustainability was
considered as a crosscutting theme, but was found to be a
better fit as a separate sector.

More money to fewer countries
--------------


7. CIDA plans to focus its efforts and resources on fewer
countries -- 25 "development partners," down from 155 current
bilateral aid recipients. (Note: The target countries are
listed at the end of this message. End note.) The IPS
expands a policy initiated in 2002 of increasing support for
countries with the ability to use aid effectively. The 25
"development partners" were selected on the basis of poverty
(generally meaning per capita income of less than US$1,000 a
year),ability to use aid effectively, and a legacy of
Canadian involvement. The number of target countries was not
pre-set and CIDA managers expected between 20-30 countries to
qualify. Of the 25 countries, most are in Africa and 18 have
per capita income under $500 per year. Programs in current
aid recipient countries that are not target countries will be
gradually phased out over time, but may continue to receive
Canadian assistance through multilateral funding.

What if you don't make the cut as a development partner?
-------------- --------------


8. The 25 "development partner" countries are expected to
receive two-thirds of bilateral development assistance funds
by 2010 (up from 42% now),but the other 130 current aid
recipients won't be abandoned. The remaining third of
bilateral aid funds will cover assistance to failed and
fragile states (Afghanistan, Iraq, Haiti, Sudan) and ongoing
bilateral relationships with countries that don't qualify as
development partners, but in which Canada has a strategic
interest. Some current aid recipient countries (such as
Thailand) are expected to graduate to middle-income status
and the relationship will evolve from one of assistance to
cooperation on mutual interests. Other countries will
continue to receive Canadian aid that is funneled through the
multilateral organizations as bilateral relationships end.
Multilateralism is a theme throughout the IPS, and
multilateral organizations currently distribute about 40% of
GOC aid.

The 0.7% Solution: Someday?
--------------


9. Most press attention focused on the target of 0.7% of
gross national product (GNI) for ODA, and the fact that the
GOC did not commit to a date for reaching that target. The
issue has particular resonance in Canada because former Prime
Minister Lester Pearson introduced the 0.7% target. The IPS
restates the GOC's long-term commitment to reaching the 0.7%
of GNI goal, but acknowledges that Canada is not at that
level. Martin, in his pre-release statement on April 18,
reiterated support for the 0.7% of GNI goal, but stressed
that Canada is not "in a position to make an unalterable
guarantee as to that it will hit that target by 2015."


10. International Cooperation Minister Aileen Carroll (the
head of CIDA) made similar statements to parliamentarians and
in news interviews. In response to a senator's query about
whether Canada wouldn't set a better example by identifying a
date to meet the 0.7% target, Carroll agreed that quantity is
important, but stressed that how Canada gives is, too.
According to the OECD, Canada's ODA increased 12.2% in real
terms from 2003-2004, reaching about 0.26% of GNI.


11. Media reports juxtapose the GOC's position with Canada's
solid GDP growth, large annual fiscal surpluses, and the fact
that 11 other countries, many of them less prosperous, have
made a commitment to the 0.7% target. When economist
Jeffrey Sachs visited Canada last year, the media focused on
his bemused response to the GOC's explanation that Canada
could not boost its GDP percentage of foreign aid because the
economy is growing too fast.


12. Canada takes a leading role on development assistance
and is active in calling for debt relief for poor countries
(refs C & D),but officials have trouble breaking through the
press, public and politicians' attachment to the 0.7% target.
CIDA officials reiterated that Canada has gone beyond its
Monterrey promise, and they are confident they can do what
they have announced.

Bad timing, but robust policy
--------------


13. CIDA distributes about 70% of Canada's ODA, with the
rest funneled through programs managed by the departments of
Finance (to IFIs),Foreign Affairs and other agencies. With
155 recipients, Canada had the most dispersed aid program of
all donors. Over time, an increasing share of funding to
development partners will be direct budget support (although
CIDA would not be comfortable providing budget support in all
cases).

14. Canada's 2005 budget, tabled in March, called for an
increase in development assistance of C$3.4 billion (about
US$2.7 billion) over five years with the goal of doubling
assistance from 2001-02 levels. That continues the past
years' commitment to increasing aid by 8% a year, with half
of that increase going to Africa, and includes C$172 million
(about US$138 million) for an initiative (announced in
February) to provide 100% debt relief over the next five
years for poor countries (Refs C & D). The opposition
parties to the right and left of the government have both
called for increases in Canada's ODA and endorsed the 0.7%
target. The IPS commits 5% of Canada's R&D spending to
research into development challenges.


15. Unfortunately, release of the IPS coincided with an
outburst of political gamesmanship as the ruling Liberal
Party and the Opposition parties tussled over the future of
the Liberal minority government. The government's successful
maneuvering to avoid a no-confidence vote over the budget
included a deal with the much smaller NDP to increase
spending on social issues, including an additional C$500
million over two years for foreign aid. Yesterday's
successful passage of the budget will both avert immediate
elections and provide a welcome increase of an additional 8%
a year for CIDA.


16. When asked about the prospects for the policy statement
should an election be called (which is still possible in the
fall),CIDA officials said that they consider this document
to be robust. The IPS reflects international (and Canadian)
consensus on the key development problems, and it supports
the MDG and the Paris Declaration on aid effectiveness, which
have widespread political support.

All publicity is good publicity?
--------------


17. CIDA officials were pleasantly surprised by how positive
the reception of the development section of the IPS has been.
The outline of the development policies has been known since
January, but the list of target countries was new. On the
IPS's release, a high percentage of media coverage touched on
the development segment, with the list of partner countries
and the debate over 0.7% gaining the most attention. Private
sector partners have been positive, with very little
pushback.


18. CIDA cited the effective "interdepartmental effort on
electronics" (use of the Internet) as an asset in spreading
the word on the IPS. Traffic on CIDA's website was up by 50%
when the IPS was released, but there were very few phone
calls or e-mails to Public Affairs, indicating that people
were finding the information they needed on line.

Inter-agency coordination
--------------

19. When asked about the IPS's interagency process in
coordinating international policy, CIDA officials point out
that the links between the "3 Ds" (Diplomacy, Development,
and Defense) are most clear in the crisis countries such as
Afghanistan and Haiti, and emphasized that such coordination
will continue. The IPS calls for a "whole-of-government"
approach to development that will coordinate policy on issues
such as debt relief, trade, and environmental problems with
other agencies. START, the newly-created Stabilization and
Reconstruction Taskforce led by Foreign Affairs Canada, will
supplement the current coordination among ministries with a
physical office at FAC, staffed by representatives from each
agency. It will be backed up by CIDA's new "Canada Corps" of
private sector experts.



20. The formal policy coordination process is through the
Global Affairs cabinet committee, backed up by committees at
the Deputy Minister and the Assistant Deputy Minister level.
The IPS also commits the GOC to provide an annual
international policy update to parliament, in which CIDA will
participate.

Overlap with MCC
--------------


21. Like the Millennium Challenge Account, the IPS sets the
goal of channeling development dollars where they will do the
most good and involving recipient countries in designing
programs. Nine Millennium Challenge Account countries are
also target development partners for Canada. Seven current
MCA countries (Armenia, Georgia, Lesotho, Madagascar, Morocco
and Vanuatu) are not on Canada's list. However, recipients
of GOC aid play a less active role than in the MCC and there
is no separate funding for development partners.

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


22. Preparing the IPS was a grueling process for the GOC,
but perhaps less so for CIDA than for the other international
affairs agencies. It has a clear mandate with strong
domestic consensus on its role and continued in a direction
it chose three years ago. Morale is good, despite pressures.
However, all is not necessarily rosy.


23. When asked by Senators on May 11 about complaints that
CIDA officials are risk averse, Carroll confirmed in strong
terms that they are "pathologically risk averse," and
"terrified of the Auditor General." She pointed out that
continued criticism, such as CIDA receives from the Auditor
General, leads to increased levels of auditing and
accountability at the expense of flexibility. She wants to
"deprocess a marvelous agency," and referred to a
conversation she had just had with former U.S. Senator George
Mitchell, who was in Canada pursuing UN reform, about the
need to get more decision making authority to CIDA reps on
the ground and to get more CIDA personnel out in the field.
Our CIDA contacts are tremendously impressed with Minister
Carroll, citing her energy, concern for staff, and efforts to
create an open and collaborative work environment. There is
strong support at all levels within CIDA for the IPS's goals.


24. List of 25 Canadian Development Partners
--------------

Africa: Benin, Burkina Faso, Cameroon, Ethiopia, Ghana,
Kenya, Malawi, Mali, Mozambique, Niger, Rwanda, Senegal,
Tanzania, Zambia
Americas: Bolivia, Guyana, Honduras, Nicaragua

Asia: Bangladesh, Cambodia, Indonesia, Pakistan, Sri Lanka,
Vietnam

Europe: Ukraine







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