FEBRUARY AEC WEALTH SHARING WORKING GROUP MEETINGS

UNCLAS SECTION 01 OF 02 KHARTOUM 000274 SIPDIS SENSITIVE SIPDIS, NOT FOR INTERNET POSTING E.O. 12958: N/A TAGS: PREL PGOV EAID EFIN PINS SU SUBJECT: FEBRUARY AEC WEALTH SHARING WORKING GROUP MEETINGS REFTEL: Khartoum 136 ¶1. (SBU) SUMMARY: The Assessment and Evaluation Commission's Wealth Sharing Working Group, chaired by the USG, convened two sessions in advance of the February 15 AEC plenary to bolster implementation of critical components of the CPA's wealth sharing provisions. The meetings focused on the current status and operations of the Fiscal and Financial Allocation and Monitoring Commission and the National Petroleum Commission. Discussions revealed the efforts of capable technocrats striving to implement the peace agreement despite strained relations within the Government of National Unity and repeated obstacles laid down by the GNU Ministry of Finance. END SUMMARY. ¶2. (SBU) The Charge convened a February 12 special session of the AEC Wealth Sharing Working group to solicit the views of Fiscal and Financial Allocation and Monitoring Commission Chairman (FFAMC) Ibrahim Moneim Mansour on the progress of national revenue transfers fifteen months after the establishment of the advisory commission. The FFAMC, formally established by the CPA to steer fiscal decentralization enshrined in the peace agreement, establishes the revenue sharing formula for transfers of non-oil revenues from the GNU to all 25 states. ¶3. (SBU) Mansour, at the helm since the commission's inception, has worked doggedly to meet CPA-mandated deadlines, including the completion of the fiscal federalism formula in advance of the 2007 budget. In contrast with the frustration expressed previously to Post regarding Ministry of Finance imposed roadblocks (reftel),the Chairman was circumspect with the assembled AEC members. "Allowances must be made for expected difficulties in the first year." Despite this politesse, he highlighted GNU shortcomings in the wealth sharing agreement's implementation: the Finance Ministry's own, repeated violation of the 2007 Budget Act, inaction on FFAMC guidance, and slow progress on CPA-mandated "revenue pooling" due to the refusal of some government institutions to report revenues. The Chairman noted, with a glance at National Congress Party (NCP) representatives, that "increased cooperation with the Ministry of Finance would be useful." ¶4. (SBU) Despite a six month delay in the FFAMC's operations stemming from Mansour's participation in the Abuja peace talks and late ministerial appointments of some commission members, the commission has effectively worked its way into the Sudanese bureaucracy. Less than six months after it inaugural May meeting, the body tabled the recommendations by its Panel of Experts to the Presidency. By late October, Mansour and his colleagues had become fixtures in senior GNU discussions determining the allocation of revenues to fifteen northern and ten southern states. The twenty-member Panel of Experts consists of a cross-section of Sudan's academic and financial elite. (NOTE: Full lists of the PoE and FFAMC membership has been e-mailed to AF/SPG. END NOTE.) The 2007 Resources and Revenues Act on the Allocation of Resources (reftel) is a virtual carbon copy of the FFAMC recommendations. ¶5. (SBU) Although the Commission's technical expertise has been incorporated into Sudan's fiscal statutes, its implementation guidelines - particularly important for overall CPA implementation - have thus far been largely ignored. Non-oil revenue transfers for 2007 were slated to occur as follows: $5.003 billion for the Ministry of Finance, $2.497 billion dispersed to each of the fifteen northern states, and $1.423 billion for the ten southern states. In practice, the Ministry transferred funds earmarked for the North and South to the National States Support Fund; an overt violation of the 2007 budget act, and a move that has further delayed funds transfers to Juba. ¶6. (SBU) Full implementation of the FFAMC's vision for comprehensive fiscal federalism has been further constrained by capacity issues in southern Sudan. The lack of banking infrastructure in all ten southern states has forced the Government of Southern Sudan to act as the steward for the entirety of the funds destined for southern state governments. The lack of GOSS-generated information on state-level self-generated income has hampered the degree to which the commission will be able to monitor and verify intra-South funds to each state "in accordance with the information it has on hand." Mansour noted to the AEC that the Presidency has endorsed this arrangement. ¶7. (SBU) COMMENT: Mansour's refusal to stray beyond the technical realm, and the absence of the SPLM at the session due to the scheduling conflict with party meetings in Yei, hampered the AEC Working Group's ability to rectify much of the Ministry of Finance's stymieing of the FFAMC's efforts during the course of the session. He would not address the relationship between the FFAMC and the National States' Support Fund (NSSF) (currently holding nearly $9 billion in funds against the advice of the commission),contending it was improper to comment on a government entity that pre-dated the CPA. In the same vein, he dodged requests to comment on the Ministry of Finance, ceding the floor to NCP representatives. In the absence of bullying by the SPLM, the NCP refused to address the KHARTOUM 00000274 002 OF 002 question, noting that it was not the GNU, but a party to the CPA. END COMMENT. ) ¶8. (SBU) In a separate AEC Wealth Sharing Working Group meeting chaired by the Charge on February 13, Ministry of Energy and Mines representatives gave a historical overview of petroleum exploration in Sudan, and fielded questions on the Ministry's relationship to the National Petroleum Commission (NPC). Deputy Secretary General Hamad El Neel Abdul Gadir noted that the Presidency recently established guidelines for the NPC's role in relation to pre-existing ministries and institutions in Sudan's energy sector. ¶9. (SBU) The NPC's Joint Technical Committee - comprised of representatives from the GOSS and Ministry of Energy and Mines - drafts and submits final oil production contracts for the NPC's final review and approval. El Neel noted new contracts were to be ready for NPC review beginning March 1. Three of Sudan's 22 oil blocks remain open to bid. Ministry projections for oil production in 2007 are for 579,310 barrels per day. This is projected to decline to around 168,000 b/d by 2017. ¶10. (SBU) El Neel's largely technical briefing glossed over political impediments to a functioning NPC. He discussed block concessions leased after the CPA's signing and before the NPC's establishment, but neglected to note this was in violation of the peace agreement, or comment on how it would be rectified. While the review of technical committee's evolution was thorough, the fact that rules governing its operations remain under dispute went unaddressed. The SPLM's absence (again as a result of Yei) prevented a more probing AEC posture. The March 7 AEC Wealth Sharing Working Group's focus on oil and the environment is expected to place the dysfunctional NPC back at the fore of the AEC's agenda. HUME