SENEGAL'S ACCELERATED GROWTH STRATEGY (AGS) AND

UNCLAS SECTION 01 OF 02 DAKAR 001270 SIPDIS SIPDIS SENSITIVE STATE FOR EB/IFD/ODF, AF/EPS, AF/W AND INR/AA AID/W FOR AFR/WA AND AFR/SD TREASURY FOR PETERS E.O. 12958: N/A TAGS: ECON EAID EAGR SG SUBJECT: SENEGAL'S ACCELERATED GROWTH STRATEGY (AGS) AND CURRENT GROWTH DAKAR 00001270 001.2 OF 002 SUMMARY -------------- ¶1. (SBU) The Minister of Finance met with the donors to update them on the development of Senegal's Accelerated Growth Strategy (AGS) on March 22. The Government intends to finalize and implement the strategy on July 1, but donors have not heard what changes have been made over the last two months. Agriculture has received the most attention, but fisheries need more. Energy, judicial and labor reforms, access to land and credit, utility costs, subsidies and payment delays must all be addressed. There is a widespread perception that debt forgiveness is financing major public works projects rather than poverty reduction. GDP growth could be as low as three percent in 2006 -- half of what it was in 2003 through 2005. END SUMMARY. WHAT'S IN THE AGS? -------------- ¶2. (U) On March 22, Senior Minister of Economy and Finance Abdoulaye Diop opened a four-hour meeting to update donors on the status of Senegal's Accelerated Growth Strategy (AGS). Diop stressed Senegal's commitment to reduce poverty significantly by 2015 in line with the Millennium Development Goals. Diop also highlighted the GOS' determination to enhance competitiveness and develop a "world-class" business climate. He cited six sectors on which the AGS focuses: -- agro-industry, -- fisheries, -- textiles, -- information technology and telecommunications, -- tourism and -- cultural and artisanal products. Diop underscored the government's determination to diversify beyond peanuts and cotton, building upon Senegal's geographic situation and information technology infrastructure while acknowledging that Senegal's peanut, phosphate, fishing and tourism industries are all in crisis and that the trade deficit is chronic. He insisted that the AGS would increase GDP growth from the 6 percent to 7-8 percent range per annum, doubling GDP in 10 years. ¶3. (U) The AGS Task Force led by Executive Secretary Ibrahima Wade then presented its work -- over 200 power point slides displayed over two hours. The Task Force discussed the phytosanitary and transport challenges associated with expanded agricultural exports but narrowed in on green beans, tomatoes, mangoes, grapes and onions as crops with significant development and export potential. ¶4. (U) Donors made a number of comments. Praising the obvious progress, they asked about the government's energy strategy, reforms that will make the judicial system more transparent and more comfortable with commercial law, reforms to the labor code, access to land, access to credit, utility costs, and delays in payments. Then Charge and USAID/Senegal Director Olivier Carduner focused on the judiciary, the labor code, the tax code, a regulatory environment that will encourage small and medium-sized enterprises, corruption, and access to credit. ¶5. (U) NGO and Senegalese agency representatives offered a number of insights. Aliou Faye, the Director of the Center for the Study of Development Politics (CEPOD), said the proposed Millennium Challenge Account (MCA) Diamniadio Industrial Platform is central to the AGS. He urged the Task Force to take another look at agro- industry, focusing on training and inputs, particularly seeds. He also said that the Task Force should examine the Ministry of Maritime Economy and Maritime Transport's new fishing strategy to ensure that the strategies are integrated. Hamath Sall, the Deputy Director General of Senegal's Investment Promotion Agency (APIX),said that the Government and the Task Force should not be too wedded to single crops or sectors. ¶6. (U) Ibrahima Wade closed the meeting by thanking donors for their comments. He assured the donors that the Task Force and the Government understand that institutional and structural reforms are fundamental. He also said that different sectoral policies will be DAKAR 00001270 002.2 OF 002 harmonized in the final AGS. TWO MONTHS LATER: WHERE'S THE MONEY? -------------- ¶7. (U) At a May 26 donors meeting with visiting International Monetary Fund (IMF) staff, World Bank ResRep Midani Tall announced that the Government intends to finalize and implement the AGS and the Poverty Reduction Strategy (PRSP) on July 1. Donors expressed concern since there is little awareness of progress or changes made since March 27. ¶8. (SBU) Moreover, Senegal's economic situation deteriorated during the first four months of 2006. While blackouts have been much less frequent, with GE/GTi back on line, and while Industries Chimiques du Senegal (ICS) has resumed operations, the Government and parastatals have had difficulty paying their bills in a timely fashion. There is a widespread perception that -- 1) GDP growth will probably only be three percent -- half of what it has averaged for the last three years -- and -- 2) proceeds from debt forgiveness are actually being used financing the major public works projects in the run-up to the February 2007 presidential and parliamentary elections. ¶9. (SBU) Tall and the IMF team acknowledged that there are "major worries" and that 2006 will be a difficult year for Senegal. They also said that the IFIs are examining energy pricing, fishing, tourism and payment difficulties. COMMENT -------------- ¶10. (SBU) Tourism revenues appear to be up, but that may be the Senegalese economy's only bright sector. ICS is producing and exporting phosphates again, but fishing is in decline, and the Government has decided to subsidize peanuts. 2006 is going to be a tough year, and six percent growth appears very elusive at this juncture. END COMMENT. JACOBS