Cablegate: First Official Donor Meeting with New Drc Prime Minister

VZCZCXRO2689
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN
DE RUEHKI #1059/01 3360730
ZNR UUUUU ZZH
R 010730Z DEC 08
FM AMEMBASSY KINSHASA
TO RUEHC/SECSTATE WASHDC 8842
INFO RUCNSAD/SADC COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 02 KINSHASA 001059

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAID EFIN EINV PGOV PREL CH CG
SUBJECT: FIRST OFFICIAL DONOR MEETING WITH NEW DRC PRIME MINISTER
MUZITO

REF: KINSHASA 426

1. (U) Summary: A group of heads of development and cooperation
agencies from key donor countries met with new Democratic Republic
of the Congo (DRC) Prime Minister Adolphe Muzito on November 22,
2008. The discussion lasted for approximately 90 minutes and touched
upon the Prime Minister's new program for the Government of the
Democratic Republic of the Congo (GDRC), on the multi-billion dollar
Sino-Congolese agreement concluded in early 2008 (reftel), the
GDRC's budget situation, and the possibility of donors providing
direct budgetary support. The meeting was called by the Prime
Minister to allow him an opportunity to solicit information about
donor activities in the DRC in advance of a meeting with Ambassadors
from donor countries, planned for the week of December 1. End
Summary.

2. (U) Prime Minister Muzito called together the heads of
development and cooperation agencies from key Coordination
Assistance Framework (CAF) group donors at his residence for a
breakfast meeting at 7:30 am on Saturday November 22. A total of
twelve representatives were present at the meeting (World Bank,
African Development Bank, European Union, France, Belgium, Italy,
Netherlands, United States, United Kingdom, Germany, Sweden, and
Canada). USAID Officer in Charge, Jeff Bryan, participated for the
USG.

3. (U) The meeting opened with an introduction from the Prime
Minister's assistant who explained the purpose of the meeting as an
opportunity for the Prime Minister (PM) to hear from key donors
regarding their actual and planned contributions in support of the
new government program presented on October 31. The PM wanted to
hear from donors in advance of his meeting with Ambassadors in order
to have a better understanding of what the various donors were doing
in the DRC. The PM welcomed the group and provided a few opening
remarks and then called on a few representatives from the donor
group to give a presentation of donor assistance.

4. (U) Marie-Francoise Marie Nelly, representative of the World
Bank for the DRC and the Republic of Congo, opened the presentations
with an overview of the Coordination Assistance Framework (CAF)
process and Priority Action Plan (PAP), noting that this was a
collaborative process with government and that the donor group was
actively engaged with the GDRC in aligning aid with government's
development agenda - the Poverty Reduction Strategy Paper.

5. (SBU) Medjomo Coulibaly, the African Development Bank (ADB)
representative, followed with the most substantial comments from the
group, raising the issues of performance and transparency as
limiting factors to donor engagement. He made it quite clear that
assistance from the ADB (and by implication donor assistance in
general) was clearly related to government's ability to perform and
account for assistance, and that the government could increase
assistance by being more accountable.

6. (SBU) PM Muzito responded to ADB comments by likening the GDRC
to a sick person who needs special attention and care in order to
recover - making the point that donor standards should be less
stringent for a post-conflict country. He stated that the GDRC's
poor ability to perform was a direct result of insufficient
resources, so that budgetary support from donors would be the
solution. The PM returned to the budget level for government,
repeating several times that with a budget of between USD 1-2
billion per year "for a sub-continent" that there was no way to make
rapid progress on transparency and governance. He also made a
reference to the corrupt and ineffective military with regard to
operations in eastern DRC as a case in point of the effects of
insufficient resources.

7. (SBU) The PM raised the issue of the multi-billion dollar
Sino-Congolese agreement concluded in early 2008 (reftel), in the
context of the GDRC's budget dilemma. "We entered the community of
nations through you, the West", the PM stated, "and we are most
comfortable together with you." He went on to say that the Congolese
were new partners with the Chinese and had not yet developed a bond
of friendship, but rather a business relationship. If the donors at
the table were able to bring billions of dollars of investment to
bear, the PM suggested that the GDRC would prefer to work with
Western donors. However, given the DRC's actual budget situation,
working with the Chinese investment was strictly a business
proposition. Regarding a planned feasibility study, the PM noted
that it would be completed by March. The PM then noted that one of
his first priorities was to "split" the Chinese investment package
into a Phase I and a Phase II, which would be intended to help avoid
the concessionality and debt sustainability questions that have so
far plagued the deal and distanced the GDRC from reaching the Highly

KINSHASA 00001059 002 OF 002

Indebted Poor Countries (HIPC) completion point. The PM noted that
he hoped to have this completed in time for an upcoming visit by the
International Monetary Fund (expected on or about December 9).

8. (SBU) The PM then called for comment from a representative of
the bilateral donors present, and Alessandro Palmero of the European
Commission made a few comments touching upon the Paris declaration -
noting that there are provisions in the declaration for making aid
more effective specifically in post-conflict countries. He also
noted that with the new government it was unclear in some cases who
the main interlocutor should be for donor countries - asking that
there be some clarification to the CAF group regarding the roles
that new ministers would play. Palmero went on to note that direct
budget support was highly unlikely in the current environment in the
DRC. This brought about a few more comments from the PM on the
topic of the GDRC's position being unlikely to improve without
resources. Finally, Palmero noted that the donor group had no
problem with the GDRC's decision to work with China on the minerals
investment package, trying to avoid developing an active split
between the CAF donor group and China.

9. (U) Belgian cooperation head Paul Cartier made a few comments on
the functioning - or non-functioning - of Thematic Groups for
donor-government coordination, noting that they had strayed far from
the conception in the Paris meetings of November 2007 and are in
serious need of refocusing as a forum for high-level exchange
between donors and key ministers. This brought about a comment from
the PM that he would begin a series of regular meetings with key
ministers overseeing thematic groups in order to keep them focused
on priorities and moving forward.

10. (U) Finally, the PM asked for comments from donors on what
their contributions could be to help bring about peace in Eastern
DRC. The World Bank and ADB reps commented again here, each noting
that they were implementing some projects in the east. This subject
did not lead to much in-depth discussion, however, and the meeting
adjourned without further discussion of peace and security issues.

11. (SBU) Comment: It is an encouraging sign that the new Prime
Minister requested a consultation meeting with key donors, appearing
to establish a new engagement with donors that could signal an
improvement in donor-government coordination. The issue of direct
budget support will clearly continue to figure in the PM's agenda
with donors, but his reaction to donor responses that this was
unlikely suggests that he will adopt a pragmatic approach to
increasing donor engagement in the DRC's budget process.

12. (SBU) With the 2009 set to be presented to parliament within
days, there are increasing concerns expressed by the GDRC, World
Bank and IMF that budgetary resources will be insufficient and that
the GDRC will have difficulty in servicing debts to the World Bank
and IMF. Failure to reach agreement with the IMF on a new Poverty
Reduction and Growth Facility (PGRF) would further delay $11 billion
in debt relief under the Highly Indebted Poor Countries program,
could impede assistance by the World Bank and other major donors and
may be economically and politically destabilizing. Post recommends
support for flexibility in World Bank financing, including
increasing resources or closer attribution of financing to the GDRC
budget. Post also supports the IMF's position that debt
sustainability issues regarding China's loans must be resolved prior
to approval of a new PGRF. End Comment.

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