DEEP CUTS IN DEVELOPMENT ASSISTANCE WILL HARM SENEGAL'S

UNCLAS SECTION 01 OF 03 DAKAR 001035

SIPDIS

SIPDIS
SENSITIVE

STATE FOR F - ACTING DIRECTOR OF U.S. FOREIGN ASSISTANCE AND ACTING
USAID AMINISTRATOR HENRIETTA H. FORE FROM AMBASSADOR
STATE ALSO FOR AF, E, EB, AF/EPS AND AF/W
NSC FOR AF SENIOR DIRECTOR PITTMAN
AID/W FOR AA/AFR WNORTH AND AFR/WA NFREEMAN
MCC FOR JBLOOM
TREASURY FOR OASIA - D. PETERS

E.O. 12958: N/A
TAGS: EAID ECON PREL KMCA PGOV SG
SUBJECT: DEEP CUTS IN DEVELOPMENT ASSISTANCE WILL HARM SENEGAL'S
POPULATION AND OUR BILATERAL RELATIONS

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1. (SBU) Having recently been apprised of possible significant cuts
to USAID/Senegal's operating (OE) budget and development program,
perhaps as early as the current fiscal year, I feel compelled to
provide an initial reaction in the hope that there is still an
opportunity for this Mission, as well as impacted embassies
globally, to influence the decision-making process. As I understand
the current discussion, USAID/Senegal stands to become a small
mission with a scaled-back program in order to free up resources for
the seven priority missions and regional offices. Part of reason
lies in Senegal's eligibility for a Millennium Challenge Account
(MCA) Compact. However, almost three years after Senegal submitted
its MCA proposal to construct an industrial platform at Diamniadio,
much more work remains to be done before a Compact can be signed.
Therefore, I would like to make eight points that I hope will be
fully considered before any final decision about USAID/Senegal's
future is made.

-- A. Senegal needs, receives and utilizes U.S. assistance across a
wide range of programs. According to the 2006 UNDP Human
Development Index, Senegal ranks 156 out of 177 countries. Adult
illiteracy is high (60.7 percent) and the percentage of underweight
children (ages 0 - 5) is over 23 percent. Furthermore, for the
third straight year, Senegal's immunization rate is below the median
for MCC countries.

For the past three years, this mission's top strategic priority has
been to encourage and support enhanced economic growth. Though
viewed as a regional success story, Senegal has badly underperformed
in GDP growth, job creation, productivity, private sector
development, expanded trade, economic diversification, public
procurement rules, property rights reform, environmental protection,
and a wide range of related government transparency issues. Senegal
is not going to escape from widespread poverty quickly or easily.
With a growing population and a marked lack of engagements into
globalized economic systems, one can understand how Senegal's
positive example of a stable, tolerant, democratic, U.S. ally could
be at risk without significant U.S. assistance towards fostering a
growing and responsive economy.

In the area of education, USAID and the Government of Senegal are
just beginning to make significant inroads at providing children,
especially girls, in rural areas with access to middle school
education in recognition that a primary school education alone will
not sufficiently prepare Senegalese youth to be productive members
of society. In health, we have just launched the President's
Malaria Initiative, which aims to reduce malaria infections by 50
percent over the next three years, and we continue to work with the
Global Fund and other donors to keep Senegal's HIV sero-prevalence
rate the lowest in Africa at 0.7 percent.

-- B. Notwithstanding that Senegal is not among the seven priority
counties, our assistance programs are effective in helping Senegal
meet priority development goals in areas where the Senegalese
Government cannot. For example, although Senegal ranks above the
median on most of the ruling justly indicators used by the MCC, lack
of good governance and transparency continue to undermine prospects
for an improved investment environment and accelerated growth. If
these issues are not addressed through development programs that
support and pressure institutions and leaders to operate more
transparently, the success of plans for accelerated growth,
including the proposed MCC-financed industrial platform, could be in
serious jeopardy.

-- C. Tying a precipitous drop in other assistance efforts to a
county's MCC eligibility could drastically hollow out our ability to
help the country meet critical development needs. While Senegal's
proposed MCA compact for a major new industrial platform -- and
perhaps assistance with a much needed national toll road -- is
squarely targeted to enhance economic opportunities and job
creation, it is no substitute for a robust bilateral program that
addresses other critical needs. The proposed MCA Compact will not
touch on important economic growth requirements, including natural
resources management, enhancing sanitary and phyto-sanitary capacity
to increase agriculture and food exports under AGOA, commercial law
reform, budget effectiveness, and many other areas where the U.S.
can and should effectively engage. Nor will an MCA Compact address
the country's pressing needs in other sectors such as health,
education and conflict resolution.

-- D. A "MCC connection" to any near-term reduction in other

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official assistance, sends the wrong message about the MCC program
and will likely put a significant strain on our bilateral relations.
As you know, the requirements that must be fulfilled leading to the
signing of an MCA Compact are detailed and rigorous, especially for
a complex proposal like Senegal's -- essentially to build a new
city. Though the Senegalese side has not always been responsive or
thorough in its efforts to support the necessary due diligence, over
the past two years we have frequently heard complaints that the
compact process has entailed examples of "moving the goalposts,"
especially in relation to how the program was initially described
during its launch in 2004.

At the same time, senior Senegalese officials, including Senegal's
Ambassador to the United States, have frequently requested and
received assurance, based on their understanding of the President's
vision for the MCA, that compact eligibility will reward responsible
public policy and not disadvantage a country for the wider range of
aid and partnership. I believe that Senegal would have chosen a
different approach to its MCA proposal -- one to address immediate
needs rather than a commitment to a long-term strategy of economic
modernization -- if there was an understanding of the potential
decrease in other economic growth assistance now being discussed.

Working through the compact process can be a battle, but one where
we can encourage, and at times prod, the host country to dedicate
time, top technical experts, and their own budget resources, because
of the MCA promise of a new avenue for significant and focused
assistance.

-- E. MCC compacts rest on a broad floor of assistance. In
Senegal's case, maintaining eligibility by meeting increasingly
stringent indicator standards is not a given. In fact, Senegal is
at risk of losing MCA eligibility particularly because of poor
performance under "Investing n People." Those education and health
indicators benefit from the programs and training that are a part of
USAID's programs. Other assistance under economic growth programs
is vital for promoting the kind of private sector-led growth that
will be a determining factor in the MCC's concept's long-term
success or failure in Senegal.

-- F. Our multi-sector assistance program keeps us at the donor
roundtable, where we lead the discussions on governance, encouraging
private-sector development, and the effective use of budget
resources. Our robust economic growth program is the most effective
in Senegal. I chair the donor-coordinating Private Sector Working
Group because of our commitment to helping Senegal achieve economic
growth. Through this forum we press the GOS on a range of
governance and transparency issues that are key to effective
implementation of donor assistance from other countries,
international organizations and NGOS, and are critical to improving
the country's private sector investment climate.

-- G. The U.S. and Senegal enjoy one of Africa's most comprehensive
and effective military cooperation partnerships -- to the tune of
USD 8.2 million in FY-2007. Senegal welcomes a vast array of U.S.
military training exercises and receives U.S. training for its
soldiers to complement a range of military missions, including
pre-deployment training for the country's 2,600-plus international
peacekeepers. While I fully support this robust military
engagement, I wonder if the United States wants to have mil-mil
activities dominate the bilateral relationship with Senegal. This
would not only create a public relations risk, but would also
significantly reduce the scope of effective, professional contacts
necessary to carry USG foreign policy priorities.

-- H. In our battle to encourage good governance and public
resources transparency, an increase or decrease in our funding
levels could, perhaps, be a useful instrument. However, absorbing
the significant OE cuts and accompanying reductions in program
funding currently being discussed without first effectively engaging
the GOS on its responsibilities in this equation seriously limits
our ability to influence policy makers and public opinion. There is
possibly room for additional "conditionality" in our assistance to
Senegal. Unfortunately, the proposed cuts would effectively
eliminate any opportunity to discuss the utility of such an
approach.


2. (SBU) I am aware of the serious budget constraints underlying
many of the painful decisions faced by both Washington and the
field. My hope is that we can face this challenge together.

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Ideally, decisions about where our precious assistance funds can
effectively be utilized, both in terms of countries and priority
sectors, can be developed with the active contribution of embassies
and USAID missions, and with a view to achieving long-term U.S.
foreign policy goals. I look forward to working with you and your
staff on these issues.

JACOBS