PRIME MINISTER FACING POLITICAL FALLOUT FOLLOWING

C O N F I D E N T I A L SECTION 01 OF 03 BAMAKO 000199

SIPDIS

E.O. 12958: DECL: 03/31/2019
TAGS: ECON EAID ETRD EINT EAGR PINR ML
SUBJECT: PRIME MINISTER FACING POLITICAL FALLOUT FOLLOWING
CRITICISM OVER RICE INITIATIVE

Classified By: Economic Officer Manoela G. Borges, Embassy Bamako,
for reasons 1.4 (b) and (d).

1.(U) Summary: Prime Minister Modibo Sidibe's widely touted
Rice Initiative was meant to be the silver bullet to reducing
rice prices and increasing local production in a time of
global food crisis. After much fanfare and US $84 million in
Government of Mali and donor money, Sidibe faces a cacophony
of complaints and accusations from producers, consumers, and
government colleagues who claim the initiative accomplished
neither of its goals. While that judgment is perhaps overly
harsh, the political swirl is encouraging new duty free rice
import arrangements that will likely also fall short of
expectations. Meanwhile, the political fate of the PM may
hang in the balance as rumors of a looming Cabinet shuffle
abound. End summary.

--------------
Yes, Minister: The Rice Initiative
--------------

2.(U) Mali's rice initiative was a response to the 2008
global food crisis, which saw a precipitous rise in the price
of staple food products and stopped or significantly
curtailed exports of certain food products amid concerns
about the sufficiency of food supplies. This posed a
particularly serious dilemma for Mali, which is 75-80 percent
self-sufficient in rice production and relies on imports to
close the gap in supply. In response, Prime Minister Modibo
Sidibe launched the highly publicized "Rice Initiative" in
July 2008. The goal of the initiative was to increase
domestic rice yields by 50 percent over the previous year,
thereby guaranteeing food security while reducing the cost of
rice for consumers by increasing market supply. The program
was also seen as an opportunity for local rice producers,
whose crops were becoming more competitive in a situation of
rising commodity prices.

3.(U) The idea had merit, as Mali is frequently described as
one of West Africa's largest potential rice producers - if
only Mali could figure out how to harness, and fully
irrigate, the vast but chronically under-performing Office du
Niger rice-growing region and implement other smaller scale
irrigation schemes. To support the Rice Initiative, the
Malian government provided USD 20 million in subsidies.
International donors, notably Canada, the Netherlands, and,
to a smaller degree, Denmark, also provided direct budget
support. At a total cost of USD 84 million, the initiative
consisted of subsidies and funding for the purchase of
fertilizers, seeds, agricultural tools, and the provision of
technical assistance to rice farmers with the aid of 102
newly-hired agricultural extension agents.

4.(U) The program was initially hailed as a success. During
a highly publicized harvest ceremony in the rice belt of the
Niger River Valley Authority in November 2008, Prime Minister
Modibo Sidibe proclaimed that Mali had produced an
unprecedented 1.6 million tons of rice, hitting the
initiative's target of a 50 percent increase over Mali's rice
production in 2007. Sidibe went on to predict that the
retail price of rice would decline from CFA 350-400 to a more
affordable CFA 300 (USD .60) per kg.

5.(U) Sidibe's predictions soon proved incorrect. The retail
price of rice remained at CFA 350-400 (USD .70 - .80) per kg,
a price 35 percent higher than at the same time last year.
In response to criticism from consumers that rice remained
unaffordable, Sidibe made a series of radio addresses in
January 2009 appealing to producers and distributors to
restrict their sales to the domestic market rather than seek
higher profit margins abroad. A subsequent agreement on
February 7 between the Malian government the Chamber of
Agriculture, and Chamber of Commerce also proved ineffective.
This deal was intended to keep prices low by encouraging
farmers to sell to distributors at a wholesale price of CFA
250 (USD .50) per kg. Distributors would then sell the rice
to consumers at a retail price no higher than 300 CFA (USD
.60),thereby limiting the mark-up to no more than 10 cents
per kilo. With no enforcement mechanism and no incentive for
producers to sell at below-market rates, the agreement had no
impact on prices.

-------------- ---
Mali's Response to "Failure": Subsidized Imports
-------------- ---

6.(U) In response to the failure of the Rice Initiative to
reduce prices, on February 26 the Malian government announced
a suspension of duties on the importation of rice from March
1 through May 31, 2009. The Deputy Director of Commerce

BAMAKO 00000199 002 OF 003


Abdoul Karim Sissoko told the Embassy that, as of March 10,
importers had registered their intent to import 180,000 tons
of rice under the new duty-free arrangement. The arrangement,
akin to a similar one in 2008, stipulates that distributors
sell at a maximum retail price of 300 CFA (USD .60) per kg.
The 2008 arrangement was unsuccessful in reducing prices, as
there was no practical way to enforce the below-market
selling price.

7.(U) Problems with the current duty-free arrangement are
already apparent. Just one day after the government's
announcement of the program, a number of importers were
already at the border with the requisite paperwork.
Observers speculated that these importers must have had
access to inside information about the program prior to its
public announcement, as there was no way that the process of
registering with the Commerce Office, receiving the
paperwork, and handling the logistics of importing could be
done in one day. Other problems with the arrangement have
also been identified, such as the exact timing of when the
low prices are to be applied and how one would distinguish
imported rice from local rice in the domestic market.

-------------- --------------
Explaining the Gap Between Expectations and Reality
-------------- --------------

8.(U) One commodity not in short supply is speculation over
why the price of rice has remained high in spite of record
production. In recent weeks, this has led some to question
the accuracy of the Prime Minister's announcement of
production levels. On March 6, a local newspaper quoted the
Prime Minister's Agricultural Advisor, Bakary Kante, as
saying that prices remained high because Mali's supply of
rice remained insufficient. An official from the Office du
Niger - the Malian government authority charged with
overseeing irrigation in Mali's main rice growing zone -
offered another assessment, attributing the high prices to
better unionization on the part of producers, who now seek a
profit margin of CFA 90-110 (USD .25-.35) per kilo versus the
CFA 30-40 (USD .06-.08) in previous years. Anecdotal
evidence suggests that producers, at least, have benefited
from the higher prices. A Malian newspaper on March 10
quoted a producer within the Office du Niger who stated that,
thanks to this year's proceeds, he would be able to repay his
debts.


9. (SBU) USAID, which provides assistance with irrigation,
estimated that the increase in rice production was likely
somewhere between 10 and 12 percent. To fully satisfy
domestic demand, Mali would need to import rice this year.
While short of the initiative's goal of a 50 percent
increase, USAID observed it was significant enough to have,
in fact, kept prices from rising to the level of that in
neighboring countries. By USAID's estimate, the price of
rice in Mali was 30-40 percent lower than that of other
countries in the region. This had not, however, satisfied
consumers, who had been led to expect that prices would
return to the levels they were prior to the global increase
in the cost of commodities. USAID explained the lower than
expected production as a combination of unrealistic goals,
hasty implementation, and some corruption, particularly in
the provision of fertilizer. Had the initiative been
implemented flawlessly, a more realistic production target
would have been 25 percent over last year's levels.

10.(U) The reaction from Mali's international donor community
regarding the project has been mixed. In a January 30
meeting, IMF Deputy Division Chief for Africa, Xavier Maret,
solicited feedback from the donor community about the
initiative. Assessments in the room ranged from diffuse
praise for the initiative to reticence based on uncertainty
about what had been achieved. A representative from Denmark
observed that it was, at least, a good sign that the Malian
government was able to act quickly and broadly in response to
rising food prices and that the initiative provided a
valuable opportunity to experiment with new agricultural
techniques. The donor group agreed that it was difficult to
discern what impact such a broad and immediate initiative had
on the price of rice. Representatives further agreed that
there was no agreement on the optimal price of rice in the
first place. The IMF representative reiterated the need for
a detailed report on the implementation of the initiative and
its impact on Mali's rice market.

11.(U) In a February 27 meeting of Mali's donor partners with
World Bank Director of Operations for Mali, Habib Fetini,
observations about the initiative's effectiveness similarly
centered on calls for a "serious, independent evaluation" of
past harvests and an accounting of the inputs funded by the

BAMAKO 00000199 003 OF 003


program.

--------------
Prime Minister Takes the Heat
--------------

12.(U) By January 2009, consumer frustrations over high
prices led to a public outcry in the Malian media. President
Amadou Toumani Toure at a February 7 public event said that
Mali's investment in the Rice Initiative had been intended to
benefit both farmers and consumers. In perhaps a half-veiled
dig at Prime Minister Sidibe, the President said is was
unacceptable that the plentiful rice harvest of 2008 had not
translated into lower market prices, and said he was seeking
an evaluation of the initiative to assess what went wrong.

13.(U) Local media have had a field day with the controversy,
with some claiming Toure accused his PM of falsifying data.
Local press has daily criticized Sidibe, calling for the $84
million spent with so little discernible impact. Rumor
mongering about Sidibe's demise amid an impending Cabinet
shuffle abound.

-------------- --------------
Comment: Is it Rice Krispies for the Prime Minister?
-------------- --------------

14.(C) With questionable methodology and no clear oversight
or evaluation procedures, Mali's $84 million Rice Initiative
has been transformed into a technical and political quagmire.
This seems, however, that it may be largely the Prime
Minister's own doing - a result of his grandiose public
statements. An independent evaluation may shed light on
Mali's actual rice production in 2008 and what impact this
had on local rice markets. If past experience is any
indication, Mali's most recent attempt to bring prices down -
by offering tax exemptions on rice imports - is a long shot,
at least from the perspective of consumers. Importers and
distributors, taking advantage of the reduced wholesale
costs, seem best placed to profit from this most recent
attempt to control the politically volatile local market.

15.(C) As the public face of the Rice Initiative, Prime
Minister Sidibe is now left to answer for the absence of
results. Sidibe is a police officer by training and in 2007
became the first Malian to attain the rank of Inspector
General of the Police. During the 1990s, under former
President Alpha Oumar Konare, Sidibe served as Minister of
Health and Minister of Foreign Affairs. President Toure and
Sidibe have been close for over 20 years and in his previous
post as Secretary General of the Presidency, Sidibe was
reportedly one of the President's closest confidants.
Political calculations, however, often trump long term
friendships. With local elections scheduled for next month
and names (including Sidibe's) already floating around to
succeed President Toure in 2012, President Toure could very
well decide that the time is right to show Sidibe the door.
President Toure's two other Prime Ministers both lasted 2 to
3 years. Ahmed Mohamed ag Hamani was PM from June 2002 to
April 2004, and Ousmane Issoufi Maiga lasted three years,
until September 2007. Comparatively, Sidibe's tenure at a
year and a half has been rather short, but then neither ag
Hamani nor Maiga had to account for a failed USD 84 million
program. As a result, instead of going out with a bang,
Sidibe's time as Prime Minister may end with a snap, crackle,
pop.
MILOVANOVIC