COMMISSIONER FERRERO-WALDNER TO ATTEND TOKYO

UNCLAS SECTION 01 OF 02 BRUSSELS 000541 SIPDIS SENSITIVE FOR NEA/MARY BETH GOODMAN AND TARA FOLEY E.O. 12958: N/A TAGS: EAID PREL ECON EFIN IMF PK IBRD SUBJECT: COMMISSIONER FERRERO-WALDNER TO ATTEND TOKYO PAKISTAN DONOR CONFERENCE REF: STATE 032668 BRUSSELS 00000541 001.2 OF 002 SENSITIVE BUT UNCLASSIFIED ENTIRE TEXT. PLEASE HANDLE ACCORDINGLY. NOT FOR INTERNET DISTRIBUTION. ¶1. (SBU) SUMMARY: USEU joined the Japanese Mission to the EU to present reftel follow-up demarche to European Commission (EC) counterparts in Brussels. The EC delegation will be headed by Commissioner Ferrero-Waldner. The final EC pledge will exceed $500 million, though the period covered will be for more than two years. Also, the EC pledge will include a significant loan from the European Investment Bank (EIB),but will not involve any budget support. Per the EC, the UK, Germany and Netherlands already have development programs in Islamabad; France and Italy might be in a position to expand their own bilateral efforts in Pakistan as a response to the Tokyo conference. END SUMMARY. ¶2. (SBU) US Mission to the EU (USEU) delivered reftel demarche to the European Commission (EC) on the April 17 Pakistan donors conference scheduled to take place in Tokyo. A colleague from the Japanese Mission to the European Union participated for the joint demarche. Japan also delivered a formal invitation to Commissioner Ferrero-Waldner, signed by the Japanese Foreign Minister. A follow-on letter, this one signed by the Prime Minister, was promised for next week. ¶3. (SBU) Commission counterparts confirmed that Commissioner Ferrero-Waldner will head the EC delegation, attending both the Friends of Pakistan event and the donor conference. She is scheduled to arrive on the afternoon of April 16 and will leave the following evening. The three other core members of the EC delegation expected to sit at the table in Tokyo include Tomasz Kozlowski (Principal Advisor, Asia and Latin America); Heino Marius (Deputy Head of Unit, Relations with Pakistan) and a senior member of the Commissioner's cabinet. ¶4. (SBU) The Japanese indicated that there would definitely be a bilateral meeting between their Foreign Minister and the Commissioner in Tokyo. EC counterparts, while affirming the usefulness of the bilateral meeting, emphasized that a trilateral involving the Japanese Foreign Minister, Commissioner Ferrero-Waldner and Ambassador Holbrooke also needs to take place. ¶5. (SBU) As regards the size of the EC pledge, EC counterparts indicated that the final figure will be over $500 million, though the period covered will be more than two years. (NOTE: After the meeting, the Japanese official present suggested that Japan believes that the total EC pledge in Tokyo could be in the $700-$800 million range, BRUSSELS 00000541 002.2 OF 002 though the EC did not use this figure in the meeting.) Part of the European pledge will be in the form of a European Investment Bank (EIB) renewal energy loan (including hydro power),estimated at more than 100 million euro. However, the rest of it is expected to be in grant form, including a contribution through the EC's new food facility. Counterparts emphasized that the EC should not be viewed as an international lender whose prime focus is to advance macro economic objectives. Rather, the lion's share of EC assistance for Pakistan is likely to be in the form of discrete project support. Although the EC sometimes provides budget support in other contexts, current EC plans do not anticipate any budget support for Pakistan. ¶6. (SBU) EC counterparts indicated that so far there had been a resounding silence as far as the specifics on pledges from the various members states concerned. They noted that the UK is the largest EU donor to Pakistan, followed by Germany and the Netherlands. They speculated that both France and Italy might increase their contributions to Pakistan as a result of the Tokyo conference. ¶7. (SBU) Referring to the recent Friends of Pakistan meeting in Abu Dhabi, EC counterparts expressed concern that a wide range of pledging goals had been put forward in that venue and that the number seemed to keep changing; first it was $4 billion, then it was $6 billion and then it was even more. EC counterparts also indicated a continued interest in a Frontier Trust Fund, while noting that both China and Saudi Arabia oppose the idea. Both countries, along with the United Arab Emirates, are likely to prefer bilateral support. In the EC view, Saudi Arabia and China already regard themselves as a "friend of Pakistan" and are not especially supportive of group approaches. ¶8. (SBU) As the meeting concluded, Commission counterparts emphasized their strong support for the Tokyo donor conference. At the same time, they repeated a concern that had been highlighted earlier, namely the need for partners to have a realistic sense of what the EC can provide. The senior EC representative present stated that they will make a good and strong pledge. However, he added partners should not give the false impression there are large sums of money on offer. Additionally, they will not rovide future assistance through budget suppot. MURRAY . .