DONORS PLEDGE OVER $5 BILLION IN NEW MONEY AT

UNCLAS SECTION 01 OF 10 ISLAMABAD 000902 C O R R E C T E D C O P Y (ADDED MCNS) SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EAID SUBJECT: DONORS PLEDGE OVER $5 BILLION IN NEW MONEY AT PAKISTAN DONORS' CONFERENCE IN TOKYO REF: A. (A) SECSTATE 24367 ¶B. B) SECSTATE 129615 ¶C. C) SECSTATE 124618 ¶D. D) RIYADH 590 ISLAMABAD 00000902 001.4 OF 010 ¶1. (SBU) SUMMARY: International pledges totaled more than $5 billion at the Pakistan Donors' Conference in Tokyo on April 17. The Donors' Conference was intended to support the implementation of Pakistan's International Monetary Fund (IMF) Stand-By Arrangement agreed to in November 2008. Special Representative Richard Holbrooke announced the U.S. pledge of $1 billion over the next two years, subject to Congressional approval. Pakistani President Zardari and Japanese Prime Minister Aso opened the conference. Japan and the World Bank co-hosted the conference which was attended by 45 donor countries and multilateral organizations. END SUMMARY. -------------- PLEDGE SUMMARY -------------- ¶2. (SBU) Donors far exceeded expectations by announcing pledges over $5 billion of new funds over two years to support the Pakistani government. The conference goal was to raise $4 billion in international assistance to support the implementation of Pakistan's International Monetary Fund (IMF) Stand-By Arrangement agreed to in November 2008 to be directed at social safety net and development programs and to bolster foreign reserves. As co-hosts of the conference, the World Bank and Japan strictly counted only new pledges of support for the final tally, although a number of other donors reaffirmed their existing levels of support and/or announced consideration of additional pledges. The list below is the unofficial U.S. tally. NEW TWO-YEAR COMMITMENTS FROM 21 DONORS (unofficial U.S. tally) BILATERAL DONORS PLEDGE (in millions of USD) Australia 43 France 264 Germany 155 Iran 330 Italy 59 Japan 1,000 Kuwait 49 Netherlands 80 New Zealand .58 Republic of Korea 40 Saudi Arabia 700 ISLAMABAD 00000902 002.3 OF 010 Spain 26.4 Sweden 5 Switzerland 29 �00A;Turkey 100 UAE 300 USA 1,000 SUBTOTAL 4,181 MULTILATERAL ORGANIZATIONS PLEDGE (in millions of USD) Asian Development Bank 200 European Commission 320 Islamic Development Bank 250 World Bank 300 SUBTOTAL 1,070 TOTAL 5,251.18 -------------- PAKISTAN STATEMENT OF NEEDS -------------- ¶3. (SBU) Pakistan President Asif Ali Zardari urged donors to provide assistance as his country continues to combat terrorism. Zardari stated that the Pakistani people are suffering from a lack of resources. He also noted that this was the first time that Pakistan had received a second-tranche of funds from an International Monetary Fund program, indicating his commitment to implementing politically difficult, yet necessary, economic reforms. Shaukat Tarin, Advisor to the Prime Minister on Finance, Revenue, Economic Affairs and Statistics, provided a description of Pakistan's short-term economic situation. Tarin also stated that the long-term cost of the conflict in Pakistan from 2001 ) 2009 was $35 billion. -------------- WORLD BANK TRUST FUND -------------- ¶4. (SBU) The Government of Pakistan announced their intention to request a Trust Fund to be administered by the World Bank to provide targeted assistance to the regions of Balochistan, Northwest Frontier Province, and the FATA. Pakistan stated a need to raise $3 billion over the next three years to support the Fund's activities. No explicit pledges were announced at the Tokyo Conference for the trust fund but a majority of delegations expressed support for the creation of the trust fund as well as a desire for the trust fund to focus on the border regions. ISLAMABAD 00000902 003.3 OF 010 -------------- U.S. PLEDGE -------------- ¶5. (SBU) U.S. Special Representative to Afghanistan and Pakistan Richard Holbrooke announced a $1 billion pledge over a two-year period to support Pakistan's International Monetary Fund (IMF) Stand-By Arrangement. The final details of the assistance package will be coordinated closely with Congress and will include project and budget assistance and project sector grants. Assistance will be directed to agriculture, education, health, poverty alleviation, and energy. This $1 billion is a down payment on President Obama's commitment to support a bipartisan bill in the U.S. Congress, co-sponsored by Senators John Kerry and Richard Lugar, which authorizes $1.5 billion in direct support to the Pakistani people every year over the next five years. -------------- OTHER BILATERAL COMMITMENTS -------------- ¶6. (SBU) Below is a brief description of the statements from the 28 donor countries at the conference, in alphabetical order. Pledged commitments are expressed in two-year commitments, unless otherwise noted. AUSTRALIA. Delegation head: Mr. Stephen Smith, Minister of Foreign Affairs. Announced a doubling of current assistance to add an additional $120 million Australian dollars (US $43.2 million). Reaffirmed ongoing military and police training as well as their broad support for security and economic development in Pakistan. CANADA. Delegation head: Mr. Jim Abbott, Parliamentary Secretary to the Minister of International Cooperation. Announced no new monetary pledge but affirmed his government's decision to select Pakistan as a focus country and review the current Pakistan strategy with a view towards informing Pakistan of new future commitments. CHINA. Delegation head: Mr. Cui Tiankai, Ambassador of China to Japan. Announced no new monetary pledge but affirmed his government's intention to continue to provide assistance through bilateral investment. Noted the establishment of the first industrial park and overseas investment company, with additional support for the telecom sector, highways, and development cooperation. Committed to strengthening agricultural exchanges to improve rice production. Stated ISLAMABAD 00000902 004.4 OF 010 intention to provide professional training in the agricultural and professional sector for 1000 students in 2009, up from 800 last year. Acknowledged $500 million USD in foreign exchange lending provided to Pakistan in fall 2008. DENMARK. Delegation head: Mr. Carsten Damsgaard, Under-Secretary for Political Affairs, Ministry of Foreign Affairs. Announced no new monetary pledge but affirmed his government's intention to launch an assistance program in Pakistan for the first time, details of which will be released at a later date. FINLAND. Delegation head: Mr. Rauli Suikkanen, Deputy Director of Ministry of Foreign Affairs. Announced no new monetary pledge but affirmed that Finland was exploring new additional assistance beyond their $3 million euro overseas development assistance for 2009. Finland reaffirmed Euro 10 million in Earthquake support for Azad Jammu Khasmir and Euro 12 million in support for the internally displaced persons (IDPs) through the International Committee of the Red Cross plus an additional 1 million euro to support civil society organizations. FRANCE. Delegation head: Mr. Pierre Lellouche, Special Representative for Afghanistan and Pakistan. Announced a pledge of 300 million euros over three years ($264 million over two years) to support capacity building in Pakistan's public sector, and an emphasis on energy efficiency. GERMANY. Delegation head: Mr. Bernd Mutzelburg, Special Envoy for Afghanistan and Pakistan. Announced $155 million USD focused on project assistance, education, skill development with a particular focus on refugees and in the Northwest Frontier Province (NWFP). INDONESIA. (observer) Delegation head: Mr. Triyono Wibowo, Vice Minister of Foreign Affairs. Announced intention to provide capacity building technical assistance to Pakistan through the Australian-based Law Enforcement Center. IRAN. Delegation head: Mr. Manouchehr Mottaki, Minister of Foreign Affairs. Announced $330 million in assistance -- $320 million in loans and a $10 million grant of overseas development assistance. Iran also reaffirmed its desire to move forward with bilateral discussions on a natural gas pipeline with Pakistan. ITALY. Delegation head: Ambassador Massimo Iannucci, Director General for Asia, Oceania, the Pacific and Antarctica/Special Envoy for Afghanistan and Pakistan. Announced new assistance to Pakistan of 42 million euro ($59 million USD). Assistance is comprised of a $40 million soft ISLAMABAD 00000902 005.6 OF 010 loan in microfinance directed to Balochistan, NWFP and FATA region, and an additional 2 million euro program to development rural cultivation of olive trees and olive oil production. Reaffirmed existing soft loan of $20 million euro to provide vocational training. JAPAN. Delegation head: Mr. Taro Aso, Prime Minister. Announced a pledge of $1 billion in assistance, premised on continued Pakistani implementation of its IMF program. The assistance will be directed at poverty alleviation and capacity building to facility the implementation of economic reforms. Reaffirmed April 7 announcement of a $5 million USD contribution to assist the internally displaced people of Pakistan. KUWAIT. Delegation head: Mr. Abdul-Rahman Al Otaibi, Ambassador to Japan. Announced a $49 million USD loan from the Kuwait Fund for Arab Economic Development for the Reconstruction of Higher Education Institutions Projects in the earthquake affected areas of Azad Jammu Kashmir. Kuwait also announced its consideration of participation in the financing of the Neelum Jhelum Hydropower project. Kuwait reaffirmed existing support totaling $323 million from 14 loans issued since 1976 in the sectors of transportation ($96 million),agriculture ($29 million),industry ($6 million), energy ($177 million),and water and sanitation ($15 million). MALAYSIA. (observer) Delegation head: unknown. Reaffirmed intention to provide technical assistance by training 500 officials in public administration, information technology, and agriculture this year. NEW ZEALAND. Delegation head: Mr. Ian Kennedy, Ambassador to Japan. Announced a new pledge of NZ $1 million ($ 580,000 USD)in humanitarian assistance to Pakistan. Specific multilateral delivery mechanism to be determined. NORWAY. Delegation head: Mr. Haakon Gulbrandsen, State Secretary for International Development. Announced no new monetary pledge but reaffirmed existing commitments of $100 million in grants (focused on primary education, good governance, cultural programs, institution building, and the environment and energy programs); $25 million in humanitarian assistance to the UN and ICRC; and, $80 million in post-05 earthquake assistance. OMAN. Delegation head Mr. Al Muslahi Khalid, Ambassador of Oman to Japan. No pledge or statement made. QATAR. (observer) Delegation head: unknown. No pledge or ISLAMABAD 00000902 006.3 OF 010 statement made. REPUBLIC OF KOREA. Delegation head: Mr. Yu Myung Hwan, Ministry of Foreign Affairs. Announced new assistance of $200 million over the next 3 years of which $40 million consist of new grants. Korea's assistance is directed at human resource development, capacity building, strengthening public institutions, and infrastructure development. RUSSIAN FEDERATION. (observer) Delegation head: Mr. Alexey Ovchinnikov, Counsellor, Embassy of Russian Federation in Japan. No pledge or statement made. SAUDI ARABIA. Delegation head: Mr. Yousef Al-Bassam, Vice Chairman and Managing Director of the Saudi Fund for Development. Announced new assistance of $700 million, of which $300 million would finance infrastructure development projects, $200 million to finance and guarantee Saudi non-oil exports to Pakistan, and $200 million deposit to the Pakistani Central bank with terms and conditions to be agreed. Saudi Arabia reaffirmed its existing assistance of more than $500 million, highlights of which area $133 million grant to finance projects in earthquake-damaged areas and an $80 million concessional loan to help finance the Neelum-Jhelum Hydropower Project. Comment: Embassy Riyadh reported on April 20 that the Saudi Deputy Foreign Minister for Economic and Cultural Affairs Yousef Saadoun explained that the Saudi Development Fund will retain control of the pledged funds and will pick and chose among projects submitted by the Government of Pakistan for Saudi financing. Deputy Foreign Minister Saadoun further noted that the Saudi government will retain the right to fund or not fund any particular project proposal. End Comment. SPAIN. Delegation head: Mr. Angel Lossada-Quevedo, Secretary of State for Foreign Affairs. Announced intention to provide $30 million Euro over three years ($26 million USD over 2 years) and hoped to direct funds to the World Bank Trust Fund. He also reaffirmed an Euro 8 million commitment to the United Nations Development Fund's Trust Fund as well as 400,000 euro pledge of humanitarian relief to the UNHCR and UNICEF. SWEDEN. Delegation head: Ms. Anna Karin Enestrom, Special Envoy to Afghanistan and Pakistan. Announced new humanitarian assistance of $5 million. Reaffirmed existing commitment of $30 million in assistance through the Food and Agriculture Organization to support the agricultural system. SWITZERLAND. Delegation head: Mr. Pierre Combernous, Head of Political Affairs Division II of Asia-Pacific, Ministry of ISLAMABAD 00000902 007.5 OF 010 Foreign Affairs. Announced a new pledge of 50 million Swiss francs over 3 years ($29 million USD). Reaffirmed existing pledge of 20 million Swiss francs this year in midterm development programs, directed to poverty alleviation and governance as well as support for the reconstruction and preparedness in the region struck by the 2005 earthquake. THE NETHERLANDS. Delegation head: Mr. Albert Gerard Koenders, Minister of Development cooperation, Ministry of Foreign Affairs. Announced a 120 euro pledge over three years ($80 million USD over two years) with a focus on the Northwest Frontier Province and FATA region through water management, education, strengthening civil society and improving the role of women. TURKEY. Delegation head: Dr. Mehmet Aydin, State Secretary. Announced a new pledge of $100 million and its intention to host the next Friends of Democratic Pakistan ministerial. Reaffirmed ongoing trilateral cooperation with Pakistan and Afghanistan through the Ankara process. UNITED ARAB EMIRATES. Delegation head: Mr. Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs. Announced intention to provide $300 million USD. The Foreign Minister urged more Muslim countries to provide support to Pakistan in the years to come. He also noted that 800,000 Pakistanis live in the UAE. UNITED KINGDOM. Delegation head Sir Sherard Cowper-Coles, Special Representative for Afghanistan and Pakistan Affairs. Announced no new monetary pledge but reaffirmed intention to double development aid to Pakistan as part of a ten-year partnership strategy totaling 350 pounds ($520 million USD), which will be front-loaded for the first few years. Components of the assistance include 60 million pounds in direct budget support, tied to reform, and 250 million in education sector. Additional emphasis will be on health, public services, pro-poor growth, and the border areas. -------------- MULTILATERAL COMMITMENTS -------------- ¶7. (SBU) Of the 15 multilateral organizations present at the conference, four provided new monetary contributions. ASIAN DEVELOPMENT BANK (ADB). Represented by Mr. Xiaoyu Zhao, Vice President. Announced a new commitment of $300 million over the next three years of non-concessional lending to expand trade finance with guarantees to the Pakistani banking sector, subject to a successful General Capital ISLAMABAD 00000902 008.3 OF 010 Increase to be considered at the ADB Annual Meeting in Bali in May 2009. The ADB reaffirmed the existing financial envelope of around $4.5 billion to fund priority programs and projects in the field of (i) energy; (ii) urban services; (iii) transport and irrigation; (iv) budget support, tied to reforms. Noted the $20 billion of assistance that the ADB has provided to Pakistan since 1968. EUROPEAN COMMISSION. Represented by Dr. Benita Ferrero-Waldner, Commissioner for External Relations and European Neighborhood Policy. Announced a 485 million euro ($640 million) assistance package for the next five years to focus on (i) education and rural development in the Northwest Frontier Province and Balochistan; (ii) energy and food security through a contribution to the World Bank's Global Food Facility; (iii) an increase in the role of the European Investment Bank in Pakistan and a commitment to provide 100 million euro of assistance in renewable energy projects to include small and medium hydropower, wind, solar and biomass. The European Commission noted that they are Pakistan's most important trading partner, with more than $7 billion in trade, and noted Pakistan's call for a long-term free trade agreement. EUROPEAN UNION (Czech Republic Presidency). Represented by Ms. Helena Bambasova, Under Secretary, Ministry of Foreign Affairs. Announced that they will host an EU summit on Pakistan in June 2009. EUROPEAN COUNCIL. Represented by Mr. Ettore Francesco Sequi, EU Special Representative for Afghanistan. Noted plans to focus on NWFP and FATA for development purposes. Also noted the need to increase donor coordination. FOOD AND AGRICULTURAL ORGANIZATION. Represented by Mr. Mitsuhiro Yokoyama, Director, Liaison Office in Japan. Observer only. INTERNATIONAL LABOR ORGANIZATION. Represented by Mr. Li Donglin, Country Director, ILO Office in Pakistan. Observer only. INTERNATIONAL MONETARY FUND. Represented by Mr. Adnan Mazarei, Assistant Director. Noted Pakistan's success at meeting the first set of benchmarks and encouraged continued progress towards fulfilling the remaining targets over the short and medium term. Also noted the need to move forward with policy reforms. ISLAMIC DEVELOPMENT BANK. Represented by Dr. Walid Abdelwahab, Director, Asia Department. Pledged $200 million ISLAMABAD 00000902 009.3 OF 010 in new assistance with details to be forthcoming. UNITED NATIONS. Represented by Mr. Jean Arnault, Assistant Secretary-General for Political Affairs, a.i. Affirmed that the UN will support of the Government of Pakistan in its coordinating responsibilities. He emphasized the importance of robust partnership and effective implementation of assistance. UNITED NATIONS POPULATION FUND. Represented by Ms. Kiyoko Ikegami, Director, Tokyo office. Observer only. UNITED NATIONS INTERNATIONAL CHILDREN'S FUND (UNICEF). Represented by Ms. Junko Kunigi, Director, Tokyo office. Observer only. UNITED NATIONS DEVELOPMENT PROGRAM. Represented by Mr. Fikret Akcura, UN Resident Coordinator in Pakistan. Observer only. UNITED NATIONS HIGH COMMISSIONER FOR REFUGEES (UNHCR). Represented by Dr. Johan Cels, Representative in Japan. Observer only. UNITED NATIONS OFFICE ON DRUGS AND CRIME (UNOCR). Represented by Mr. Bernard Frahi, Deputy Director, Division for Operations. Observer only. WORLD FUND PROGRAM. Represented by Mr. Anthony Banbury, Regional Director/Asia Bureau. Observer only. WORLD BANK. Represented by Ms. Isabel Guerrero, Vice President, South Asia Region and Mr. Yusupha Crookes, Country Director in Pakistan. Announced a new pledge of $300 million in the form of an International Bank for Reconstruction and Development loan, conditional upon Pakistan's continued stabilization and credit worthiness. Reaffirmed $1.4 billion of total assistance to be disbursed to Pakistan by the end of June 2009. -------------- OTHER ITEMS -------------- ¶8. (SBU) The April 13 announcement of the decision to impose Sharia law in the SWAT valley of Pakistan prompted statements by the French, Germans, Netherlands, Sweden, and the Czechs (as president of the European Commission) calling for improved governance and the establishment of the rule of law. Foreign Minister Quereshi noted that he felt there was a "general misunderstanding of the Sharia policy" and invited ISLAMABAD 00000902 010.7 OF 010 the Special Representatives to Islamabad to participate in a briefing on the legal developments in the SWAT valley. Other reoccurring themes which were repeated by several delegations included the need to develop effective donor coordination, promote regional trade by improving bilateral Pakistan-Afghanistan transit trade, and a re-convening of the Pakistan Development Forum soon. -------------- COMMENT -------------- ¶9. Comment. The success of the donors' conference exceeded expectations. Of particular importance was the $1 billion contribution from the Gulf States -- Saudi Arabia ($700 million) and the United Arab Emirates ($300 million). The World Bank's decision to limit the final pledge figure to new assistance totaling $5.2 billion was helpful in adding some rigor to the pledging process. Donors' statements of conditioned assistance was strategically important to encourage further Pakistani progress on needed economic reforms. These reforms, more than donor assistance, will ultimately determine Pakistan's financial stability. The combined total of existing and new assistance announced at the conference was more than $13.6 billion USD. The next step will be to ensure that donors follow through on their pledges to meet Pakistan's most urgent social, economic, and welfare needs. End Comment. FEIERSTEIN