EMBASSY BANGUI'S REACTION TO THE WORLD BANK'S POVERTY

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TAGS: PGOV PREL PHUM PINR EAID ECIN ECON EFIN EINT
ETRD, CT
SUBJECT: EMBASSY BANGUI'S REACTION TO THE WORLD BANK'S POVERTY
REDUCTION STRATEGY ANNUAL PROGRESS REPORT (APR)


1. (SBU) SUMMARY: AmEmbassy Bangui has reviewed the World Bank's
Poverty Reduction Strategy Annual Progress Report (APR) of the
Central African Republic and takes exception to much of the
document. Post has seen little real progress or commitment on
the part of Central African Republic's government (CARG) to
implement serious economic reform, fight corruption, or
encourage private investment. While the government has set up
the structures mentioned in the report, the actual effectiveness
of these structures is limited and we have seen what appears to
be an escalation of opportunistic behaviors on the part of some
government ministries. It is probably impossible to find real,
hard numbers, but the circumstantial and physical evidence of
corruption and mismanagement is overwhelming. END SUMMARY.


2. (SBU) Post views with deep concern the CARG's lack of
commitment to growth and national reconciliation and does not
share the World Bank's optimistic view. The CAR was ranked 180
out of 181 countries surveyed in the World Bank's 2009 Doing
Business index. It was also ranked 151 out of 180 countries
surveyed in Transparency International's 2008 Corruption
Perceptions Index. In a country that is the fifth largest
producer of gemstone quality diamonds, being ranked 178 of 179
countries on the UN's Development index is a seeming non
sequitur. (Sadly, the CAR was ranked 172 only a year ago - it is
significant that the situation is getting worse, not better.)
There is money in the Central African Republic, but it is often
diverted or misappropriated.


3. (SBU) Below are several ``achievements'' cited by the report
and Post's analysis of the state of affairs (note: paragraphs in
quotes are from APR, bullets are Post's comments):

``The APR describes the efforts the government has made to
restore peace and security. Staff agree that these have been
significant. Efforts toward political stability culminated in
the Inclusive Political Dialogue in which all major political
actors (social, political, and rebel groups) participated in
December 2008, and the creation of coalition government
including members from the civil society and the opposition as
well as the rebel groups. Such initiatives followed on the
Libreville Agreement of June 2008, and an Amnesty Law was
promulgated in October 2008 covering crimes committed since 2003
by political or military leaders (except for war crimes and
crimes against humanity that are under the jurisdiction of the
International Criminal Court). Restoring peace throughout the
country remains a challenge, particularly in the northern areas.
However, it is expected that the government will be able to move
toward another round of elections in 2010 with the support of
the international community-especially the three peacekeeping
missions (MINURCAT, EUFOR and MICOPAX) and the UN Peace Building
Office''

- As reported in 09 BANGUI 09, the IPD did not create a
coalition government. There was a minor shuffle and opposition
figures were given insignificant ministries, but the result
cannot not be viewed as a true power sharing accord. President
Bozize remains surrounded by a cabal of long time ministers, all
of whom are widely suspected of corruption. Furthermore, the
follow up committee to the IPD has been unfunded and largely
ignored. Its most recent snub was the disregarding by the
government of the electoral code it wrote, despite its approval
by the opposition and most others.

- MINURCAT has no peacekeeping mandate vis a vis Central African
disputes. It is in Birao, and Birao only, to protect
humanitarian workers and refugees against Sudanese incursions.
09 BANGUI 114 gives examples of how (in)effective MINURCAT has
been at keeping the peace. Furthermore, MICOPAX has been a
virtual none presence in the country. Charged with keeping the
peace and training the FACA, they have done neither. Violence in
Kaga Bandoro in Feb/March 09, site of a MICOPAX contingent, was
not dealt with by the forces present. The FACA in private has
been vocal in criticism of MICOPAX's performance. Finally, EUFOR
is no longer in existence. MINURCAT, EUFOR and MICOPAX are not
credible peacekeeping/making forces.


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- Lastly, the elections: there has not been, to date, a penny
budgeted by the government for elections. Nor has an electoral
commission been put in place. Nor do electoral lists exist.
There has been scant evidence that the government is moving
towards elections except through movement forced upon it by
national and international actors.

``The priority for the government in the next few months is
rapid action on the disarmament, demobilization, and reinsertion
(DDR) program to ensure political stability and sustain peace.
The government and donors are discussing design and
implementation of the program. UNDP is leading the discussion.
Although a total of USD 20 million has been identified, the
total costing is not yet completed. The recommendations of the
SSR need to be implemented, in particular revision of the
documents governing C.A.R.'s security sector to improve public
financial management and budgetary processes and minimize
leakages in C.A.R.'s security agencies.''

- There has been no rapid action on DDR. Money promised by CEMAC
at the end of 2008 for DDR has only just been accepted by the
CAR as being for DDR instead of for their own discretionary
spending. Further money for DDR from the international community
is proving difficult to raise according to a source close to the
project.

- Rebellion in the North and Northeast continues with little
government intervention other than the deployment of very small
numbers of soldiers. The Minister of the Interior visited part
of the conflict zone, but nothing came of his trip. President
Bozize has announced publically his intention to take a
``muscular'' approach to solve the issues. In the past, as
documented in 09 Bangui 46 and multiple reports from human
rights organizations going back years, this ``muscular''
approach has included the killing of civilians - which only
further reinforces the rebellion, increases the flow of Central
Africans to Chad and Cameroon and increases the need for
international support and feeding of internally displaced
persons. (The United States provides between USD 5M and 15M per
year to a country with vast reserves of rich agricultural land
and abundant rainfall.)

- Further down in the report, the IMF states "The major actions
undertaken by the government in this sector arise from the
Security Sector Reform (SSR) and relate to: ``open doors'' days
have been organized; 25 illegal barriers have been dismantled;
300 uniforms have been provided for the police by the French
technical assistance authorities." Post does not believe that
getting 300 uniforms from the French is a ``major action''.
While the report cites that illegal road blocks have been
removed from its road ways, hundreds still remain. A trip from
Bangui to Doula, Cameroon will cost an individual passenger in a
motor vehicle upwards of USD 200 in tolls, of which USD 15 are
registered.

``Growth is central to achievement of C.A.R.'s ambitious PRS.
The APR rightly discusses the key growth sectors: forestry,
mining and mineral exploitation, agriculture and tourism. It
makes it clear that progress has been made in key areas, in
particular infrastructure and governance in natural resources,
which is critical for growth and poverty reduction.''

- Tourism is almost at zero in the CAR and will be so until the
roads are fixed, banditry eradicated and basic services are
restored to the country. The country cannot credibly claim that
tourism is a pillar of its growth strategy as it does little to
encourage it.

- Agricultural production is mostly at a sustenance level. The
pitiful states of roads and the ``tolls'' that police and
military checkpoints demand make it difficult to move produce
over any distance at all. Cash crop exploitation is at a virtual
standstill due to a lack of infrastructure.

- The mining sector is dysfunctional at best with very little
industrial mining at all and those that do exist are harassed

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constantly by the government.

- Post does not expect the timber sector to be a growth industry
during the financial crisis.

- The report also fails to mention that outside of Bangui, at
best, there is only four hours of electricity a day, and for the
vast majority of the country there is simply no electricity at
all.

- Unfortunately, every sector they have identified as ``growth''
initiatives by the CAR are anything but and are even being
actively stunted, in the case of the mining sector, by the
government.

``The APR highlights the government's commitment to the road
program but does not discuss other transport infrastructure. It
is commendable that the government is providing a stable source
of funding for road maintenance. Although the targets for 2008
have not been achieved, the APR notes that 1,500 km of roads
were rehabilitated, which has reduced the share of
unrehabilitated roads from 42 percent to 17 percent. In
addition, 206 km of rural roads were rehabilitated and 52 km
constructed, which has increased the share of rural roads in
good condition from 5 percent to 12 percent-above the 2008
target.''

- Roads in the CAR are in desperately ill repair and the
international community is often times more invested in fixing
the dilapidated infrastructure than the government it. The
Ministry of Equipment told a USAID team that they have USD 12
million dollars a year for road work and the CAR needs USD 400
million. While the government does suffer from a lack of means,
Post does not consider doing 3 percent of the work needed is
making road work a priority.

- The report does not give a definition of ``unrehabilitated''.
Rehabilitation often entails simply clearing overhanging brush
or digging loose dirt from the side of the road to fill existing
pot holes, ignoring the underlying structural issues.


4. (SBU) One the most troubling aspects of the CARG's
mismanagement of its economic development is in the sector of
mining. The Ministry of Mines rejected the World Bank draft of
EITI mining code twice, and then rewrote it themselves and may
be using it as a ruse to take control of the mines. The new code
contains the following troubling provisions:

- A bonus payment of an unspecified amount to fund the Fonds
Developpement Minier (a slush fund for the Minister that may be
in contravention of the Finance Code). The amount will be
specified in Convention Minier to be negotiated with each
company so it gives the Minister total discretion on how much he
demands.

- 15 percent for the State in free carried interest in any
mining project. Most countries that are more developed than CAR
only require 10 percent and this has been mentioned as a major
disincentive to investors.

- 15 percent of the production for the State, whether in cash or
product. It should be noted that one of the products of mining
is uranium yellowcake.

Furthermore, the Ministry has closed down all but three of the
diamond trading companies in the country. Each of the surviving
companies has connections to people in the highest level of
government. Citing the provision that the collecting houses have
not fulfilled their legal obligations, the Ministry of Mines has
effectively consolidated the mining industry in a few well
connected hands and done so without legal recourse or
transparency for the closed companies.


5. (SBU) One Canadian mining company had their long standing
convention abrogated after a multi-year investment of over USD
50M. Then their new agreement with the government was rescinded

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within hours of its approval by the President. An American
company has been in litigation with the government of the CAR
since 2005 over oil exploration rights secured under the former
regime but disputed by the current one with little movement in
the interim.


6. (SBU) COMMENT: The document, while a progress report, is
deficient in describing the reality on the ground. Currently, it
appears that the government of CAR is more likely to use World
Bank funds and debt relief to line the pockets of government
officials rather than enacting real reform or broad-based
economic development. Post suggests that debt relief is a
powerful tool that could affect real positive results from the
CARG and should not be approved until the CARG has made
meaningful and tangible reforms. END COMMENT.
COOK