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