ALLEGATIONS OF CORRUPTION IN WHEAT SALES ARE FALSE

S E C R E T SECTION 01 OF 02 ISLAMABAD 003492 SIPDIS E.O. 12958: DECL: 11/05/2018 TAGS: EAGR EAID ECON EFIN ETRD PK PREL SUBJECT: ALLEGATIONS OF CORRUPTION IN WHEAT SALES ARE FALSE REF: TD-314/075308-08 Classified By: Anne W. Patterson, Reasons 1.4 (b),(d) ¶1. (S//NF) Summary. Post is concerned over a recent RAO report (Reftel A) regarding the misuse by the Government of Pakistan (GOP) of USG funds earmarked to purchase wheat. Post takes any claim regarding the misuse of U.S funds seriously. In response, EconOff has attempted to confirm some of the details from the report. However, Post has not been able to validate the claims that USAID Economic Support Funding (ESF) was abused nor that the GOP made any wheat purchases in September. GOP data shows that it has not purchased wheat from the US since December 2007. Post will continue to monitor any allegations of misuse of USG funding. Post notes that rumors abound of President Zardari,s corruption. Many may well be true, but some are surely put forward by political opponents and none can be validated in regards to wheat sales. End Summary. ¶2. (S//NF) Post is concerned by the report (Reftel A) claiming that the GOP made a USD 12.8 million wheat purchase in September 2008 using Economic Support Funds (ESF) and that President Zardari personally profited from the transaction. In an effort to corroborate these claims, Post reviewed USAID,s wheat purchases under the ESF program in Pakistan and the GOP wheat transactions during September. -------------- Economic Support Funding -------------- ¶3. (SBU) USAID reports that the ESF funding used for food aid for Pakistan amounted to USD 8.5 million in FY08. The funds went towards an agreement signed with the World Food Program on September 18, 2008. The program provides for delivery of approximately 11,000 metric tons (MT) of wheat to Pakistanis in parts of the North West Frontier Province (NWFP) and Balochistan. This is the only ESF funding used in FY08 towards food aid. There are other lines in the ESF budget, however, for Education, Democracy and Governance, Economic Growth, Health, Earthquake and Reconstruction, and Program Support but none of these program funds are associated with food aid. -------------- Wheat contracts -------------- ¶4. (SBU) According to Post,s contacts at the Ministry of Food, Agriculture, and Livestock (MINFAL),Economic Affairs Division (EAD) and Trading Corporation of Pakistan (TCP),the GOP did not purchase any wheat in September 2008 either through commercial means or food assistance programs. TCP data shows the following purchases/amounts of red wheat, imported from companies from Russia, Romania, Bulgaria, Ukraine, and Canada: June 14: 140,000 MT at $399.45 per MT June 28: 516,000 MT at $409.88 per MT July 26: 430,000 MT at $374.00 per MT July 30: 518,000 MT at $371.71 per MT August 7: 210,000 MT at $361.75 per MT ¶5. (SBU) In mid-October, the TCP was supposed to issue a tender for 700,000 MT of white wheat and buy from the company offering the lowest price. This tender has not been approved as MINFAL has indicated that they have not been allocated enough resources due to the current economic crisis. -------------- Procurement process: Ministries involved -------------- ¶6. (U) The wheat purchasing process begins with MINFAL creating a proposal specifying the technical specifications of the purchase (quantity, quality, and type). This proposal is then sent to the Economic Coordination Committee (ECC),a ISLAMABAD 00003492 002 OF 002 cabinet level group chaired by the Prime Minister. Once it is approved by the ECC, the proposal goes back to MINFAL for implementation. MINFAL coordinates with the TCP, which organizes the tenders, purchases, and importation of the wheat. TCP submits a tender for the specified amount of wheat and companies submit bids with different prices. The TCP then picks the lowest bidder in a transparent manner. EAD was not involved in these commercial transactions. The EAD is typically only concerned with foreign assistance agricultural transactions, not commercial ones. ¶7. (S//NF)) Comment. EconOff has not been able to substantiate these claims and can factually prove that these shipments did not result in the misuse of ESF funding. Since neither the amount nor the purchase quoted in the report can be validated, Post does not believe that the allegations of corruption and the misuse of USG funding are warranted in regards to wheat sales. Post notes that rumors abound of President Zardari,s corruption. Many may well be true, but some are surely put forward by political opponents. However, Post will continue to monitor any such allegations and ensure that any alleged misuse of USG funding is thoroughly examined. End Comment. PATTERSON