GERMANY BOOSTS ASSISTANCE TO AFGHANISTAN AND

C O N F I D E N T I A L BERLIN 000053 SIPDIS STATE FOR EEB/IFD/ODF (LEATHAM, ALEXANDER),SRAP (GOODMAN), SCA/A (BRADY),SCA/P (BLAIR),EUR/CE (HODGES, SCHROEDER) TREASURY FOR ICN (NORTON) E.O. 12958: DECL: 01/14/2020 TAGS: EAID ECON EFIN PGOV PREL AF GM PK SUBJECT: GERMANY BOOSTS ASSISTANCE TO AFGHANISTAN AND PAKISTAN REF: A. BERLIN 01609 ¶B. BERLIN 0038 Classified By: MINISTER-COUNSELOR FOR ECONOMIC AFFAIRS ROBERT POLLARD, REASONS: 1.4 (B) AND (D) ¶1. (C) SUMMARY: Germany is poised to ramp up its civilian reconstruction and development assistance to Afghanistan by two-thirds over last year, bringing its 2010 total to 430 million euros ($620 million). Additional funding would go towards rural development projects in the north. This considerable increase is due in large part to the influence of new Development Minister Dirk Niebel of the Free Democratic Party (FDP). More modestly, Germany increased its assistance to Pakistan in late October, just after Niebel took up his new post; it is now on track to deliver 141 million euros ($203 million) in 2009-2010. The outlook for collaboration between the United States and Germany on development assistance in Afghanistan and Pakistan is improving. END SUMMARY. BIG INCREASE IN AFGHANISTAN AID EXPECTED -------------- ¶2. (C) Germany is already the third largest contributor of development assistance to Afghanistan, having provided nearly 1.4 billion euros since 2001. Martin Kipping, Afghanistan Desk Officer, Ministry for Economic Cooperation and Development (BMZ),told us there would be a special amendment to the FY 2010 federal budget, currently under discussion in the German Parliament ("Bundestag"),to raise total assistance to 430 million euros. BMZ would provide 250 million euros of the total, while the Ministry of Foreign Affairs (MFA) would provide 180 million euros. Kipping was unable to provide a breakout of the funds, but noted a special focus would be on "rural development in northern Afghanistan." While approval in the German Parliament ("Bundestag") is still needed, Germany will likely announce this increase at the January 28 London conference, said Kipping. In London, the Germans would like to see a "comprehensive conference," Kipping explained, which pays attention to "social development, economic development and governance issues," as well as security issues. More important than additional resources, however, may be the time horizon to which western countries are willing to commit. ¶3. (SBU) The hoped for 430 million euro total for 2010 represents a two-thirds increase over 2009, when the total was 260.4 million euros. BMZ's share of the 2009 total comes to around 144 million euros, thanks in part to the new Development Minister Dirk Niebel (FDP). Weeks after taking up his new post last fall, Niebel announced BMZ would increase civilian assistance to Afghanistan by around 50 million euros in 2009, bringing BMZ's contribution to 144 million euros (REF A). BMZ projects focus primarily on energy (e.g., the electrical transmission line from Uzbekistan to Kabul); water (e.g., drinking water in Kabul and northern cities); education (e.g., construction of teacher training colleges); and "sustainable economic development" projects (e.g., microfinance). Also included in the 144 million euro BMZ figure is around 12 million euros for emergency humanitarian aid. ¶4. (SBU) The MFA contributed 116.4 million euros of the 2009 total. MFA projects are often short-term and/or ad hoc, according to MFA contacts, and focus on areas such as civil society building, vocational training, mine clearing, secondary education, counter-narcotics and culture. There are also major infrastructure projects, including the reconstruction of the Mazar-e-Sharif airport and rehabilitation of provincial hospitals in Balkh and Feyzabad. The MFA figures incorporate 50.2 million euros for police training, which the Interior Ministry administers (REF B). Germany's contribution of 50 million euros last year to the Afghan National Army (ANA) Trust Fund is above and beyond the 260.4 million euros in development assistance in 2009. BMZ: BIG PROBLEMS ARE SECURITY AND CORRUPTION -------------- ¶5. (C) Kipping said there were signs of progress in Afghanistan: Mazar-e-Sharif was relatively stable and increasingly prosperous. Development projects have reached "two-thirds of all villages." Unfortunately, the security situation has deteriorated, which prevents development agencies from carrying out their work. The other main problem is corruption. One key to fighting corruption is having "capable Afghan partners." In this regard, certain ministries are easier to work with than others: the Ministry of Rural Rehabilitation and Development and Ministry of Finance are able partners ) "basket financing" is possible. The Energy and Water Ministry, on the other hand, "needs close monitoring." The U.S. "civilian surge" is impressive, he said, adding that the Germans were pleased with the staffing of northern provincial reconstruction teams (PRTs) with State/USAID personnel. Kipping thought corruption in the south was often linked to insecurity: it is too unsafe for U.S. development workers to monitor projects. Without their watchful eye, funds are more easily diverted, breeding resentment in the population: "People notice the big car next door." ¶6. (SBU) Andreas Berghoff of the German development implementing agency KfW told us western donors lacked an overall strategy for civilian aid in Afghanistan. What is needed is better coordination of "long-term investments," which take into account the Afghan National Development Strategy. The Germans would prefer a beefed up UNAMA -- currently under-resourced and ineffective -- to oversee development coordination. "ISAF does not have the appropriate expertise." PAKISTAN: DEAL FINALLY SIGNED -------------- ¶7. (SBU) BMZ Pakistan Desk Officer Maren Lipps told us Germany would contribute 141 million euros in development and humanitarian assistance to Pakistan in 2009-2010 -- a figure which increased in late October just following Niebel's appointment. This total exceeds Germany's pledge of 115 million euros made at the Tokyo Donors' Conference. Of the 141 million euro total, BMZ is to provide 107 million euros. Projects focus primarily on basic education, public health, energy, democracy promotion and governance, particularly in the North-West Frontier Province, the northern areas administered by the government, and the northernmost part of Punjab province. BMZ's funds include 10 million euros for internally displaced persons (IDPs),10 million euros for the RAHA initiative supporting Afghan refugees in Pakistan, and another 10 million euros for emergency aid. Delayed since June, the 2009 financing agreement between BMZ and the Pakistani government was finally signed at the end of the year, said Lipps. This allows disbursement of the 93 million euros of BMZ funds programmed for 2009. 2010 funds are still pending Bundestag approval. ¶8. (SBU) The MFA's share of the 141 million euro total in 2009-2010 is 34 million euros. Of these funds, around 29.4 million euros are intended for "crisis prevention." Around 4.6 million euros are for IDPs (which brings Germany's total contribution for IDPs to 14.6 million euros in 2009-2010). (NOTE: BMZ and MFA figures include funds channeled via agencies such as UNHCR and the World Food Program.) COMMENT -------------- ¶9. (C) Under the leadership of new Development Minister Dirk Niebel, Germany appears prepared to contribute significant new funds to civilian reconstruction and development assistance in Afghanistan. Having increased aid last October, Niebel appears inclined to do more in Pakistan, as well. Niebel wishes to change the way BMZ operates, coordinating more closely with the Foreign and Defense Ministries in Berlin and on the ground in Afghanistan. He would like to concentrate BMZ's resources where German forces are operating, and direct development funds to NGOs willing to work with the German military. This approach is a clear break with that of Niebel's predecessor Heidemarie Wieczorek-Zeul of the Social Democratic Party (SPD),who tried to separate German development policy from foreign and security policy. She also opposed increasing aid to Afghanistan, claiming that better donor coordination was needed first. Strong and early engagement with Niebel at a senior level could help build stronger U.S.-German cooperation in Afghanistan and Pakistan. Niebel plans to visit Washington at the end of April. MURPHY