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.

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Economic Support Funding
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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.

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Wheat contracts
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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.

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Procurement process: Ministries involved
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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

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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