VZCZCXRO8300
RR RUEHBZ RUEHDU RUEHMR RUEHRN
DE RUEHTO #0159/01 0501615
ZNY CCCCC ZZH
R 191615Z FEB 10
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 1302
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0621
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 05 MAPUTO 000159 
 
SIPDIS 
 
STATE PASS USAID 
 
E.O. 12958: DECL: 02/16/2020 
TAGS: EAID PGOV PREL KDEM MZ
SUBJECT: DONOR COORDINATION MECHANISMS--INCREASING USG 
INFLUENCE IN MULTI-LATERAL POLITICAL DIALOGUE 
 
REF: A. MAPUTO 50 
     ¶B. 09 STATE 124499 
     ¶C. 09 MAPUTO 1346 
     ¶D. 09 MAPUTO 1165 
 
MAPUTO 00000159  001.2 OF 005 
 
 
Classified By: Deputy Chief of Mission Todd Chapman for reasons 1.4 (b+ 
d) 
 
¶1.  (C)  SUMMARY: Over the past two years post has 
conscientiously developed stronger relationships and 
coordination with other donors at various levels in order to 
influence an ongoing multi-donor dialogue on key issues, 
specifically in the G-19, a collection of like-minded donors 
providing direct budget support.  This group of 19 donors 
(Britain, Ireland, Norway, Sweden, Finland, Denmark, Holland, 
Switzerland, Germany, Austria, Italy, Portugal, Spain, 
Canada, World Bank, African Development Bank, and European 
Community), dubbed the G-19, had de facto become the primary 
forum for donor discussion and cooperation, and their 
quarterly political dialogue continues to be the primary 
mechanism for communicating donor concerns to high-level 
Government of Mozambique (GRM) officials.   The then-Charge 
(now DCM) and USAID Director have worked to advocate for USG 
inclusion in major donor policy discussions and preparations 
for policy dialogue with the GRM.  Embassy, USAID, MCC, and 
CDC officers at various levels have been active in G-19 
Technical Working Groups.  These efforts led to the U.S. 
joining the G-19 as an "associate member" in April, 2009. 
The improved relationships with other donors and active 
participation in G-19 policy-related discussions have 
resulted in increased USG influence on the policy dialogue 
agenda of all donors, including a stronger stand on the 
irregularities of the recent election and governance issues. 
As the USG looks carefully at the delivery of foreign 
assistance through the QDDR and PSD-7 discussion, and 
responds to a push for more use of government systems, the 
efforts made to implement the Paris Declaration in 
Mozambique, and the limitations and challenges that have 
become apparent, will be useful experiences to evaluate and 
assess.  END SUMMARY 
 
--------------------------------------------- -------- 
USG WAS SEEN AS "PUNCHING BELOW ITS WEIGHT" ON POLICY 
--------------------------------------------- -------- 
 
¶2.  (C)  At a meeting between resident donor representatives 
and a Senate Foreign Relations Staffdel in August 2007, a 
senior Head of Cooperation from a major Nordic donor 
suggested that the U.S. government was "punching below its 
weight" in terms of its role in Mozambique's policy dialogue. 
 He said that given the size of the U.S. program and its 
importance to Mozambique, the USG was not playing an active 
enough role nor having the impact it should have on key 
policy issues.  The primary reasons for this were that the 
USG was outside the multilateral policy dialogue process that 
was carried out by the budget support donors, USG staff were 
under represented at all levels in productive policy dialogue 
including the donor-led technical working groups in the 
priority program areas for U.S. foreign assistance (e.g. 
health and HIV/AIDS), and levels and impact of U.S. 
assistance were not well known. 
 
¶3.  (C)  The G-19 carries out an annual review of progress 
toward key targets and objectives associated with the 
Mozambican government's Poverty Reduction Plan.  The Charge 
and USAID Director worked on developing improved 
relationships with other major donors and becoming an 
influential part of the donor groups engaged in high-level 
dialogue with the GRM.  Strong donor advocates for general 
budget support as the preferred mechanism for donor 
assistance in the aftermath of the Paris Declaration had 
influenced the evolution of donor coordination in ways that 
led most major donors to include some level of general budget 
support under a Memorandum of Understanding (MOU).  This MOU 
with the GRM governs the mechanisms for reviewing progress 
toward development objectives. 
 
¶4.  (C)  The COM and USAID Director, together with the 
Japanese, pushed for implementation of the observer status 
outlined in the MOU but met with resistance to inclusion in 
meetings that involved discussion of internal G-19 processes, 
which was part of the agenda for nearly all meetings.  They 
also worked to develop strong personal relationships with the 
key individual actors within the G-19 and pointed out the 
benefits to the G-19 of having the largest bilateral donor as 
part of the group presenting issues for discussion with the 
government. 
 
 
MAPUTO 00000159  002.2 OF 005 
 
 
¶5.  (C)  Resistance to USG participation in the G-19 came 
from those who felt that "club membership" should be an 
incentive to countries to begin moving a portion of their 
assistance to direct budget support and that the USG had not 
demonstrated a commitment to the principles of the Paris 
Declaration by refusing to provide program support through 
sector-specific common funds or budget support and developing 
a separate project implementation unit for the MCC program. 
Since the G-19 provides equal voice to all donors independent 
of the size of individual assistance levels, smaller donors 
have influence disproportional to their funding levels and 
many such donors feared that USG participation might dilute 
their influence within the group. 
 
¶6.  (C)  To counter this resistance, USG arguments focused on 
the efficiency principles of the Paris Declaration, noting 
that carrying out a separate dialogue with non-members of the 
G-19 creates additional workload for the GRM and allows them 
to play off donor groups against each other (NOTE: GRM 
interlocutors frequently complained about the G-19 to the 
United States and about the United States to the G-19.  END 
NOTE).  Ultimately, Minister of Planning and Development 
Aiuba Cuereneia requested that the G-19 include all major 
donors in their joint review process and interactions with 
the government via a formal letter to the Development 
Partners Group (an informal and ineffective donor group led 
by the World Bank and the UN) in June 2008. 
 
---------------- 
JOINING THE CLUB 
---------------- 
 
¶7.  (C)  Without any agreement or consensus on a new 
structure for donor coordination, the G-19 voted, in 
November, 2008, to offer the U.S., Japan, U.N., and IMF the 
opportunity to sign the new MOU for budget support to the GRM 
as "associate members."  This status was subsequently 
negotiated to mean that associate members would be allowed to 
participate in all meetings of the G-19 with the exception of 
the quarterly political dialogue meetings with the government 
(which are conducted by the leadership troika plus the World 
Bank and European Commission) since, as associate members, 
they could not become part of the leadership group.  The G-19 
Chair pointed out that these were the terms operating for 
most of the G-19 membership as most countries were not part 
of the leadership group and therefore did not participate in 
the political dialogue process directly. 
 
¶8.  (C)  The G-19 offer of associate membership seemed to be 
driven by recognition that consensus on an all-inclusive 
donor group as the focus for political dialogue was unlikely 
and a calculation that bringing in the United States and 
Japan would appease the GRM as a response to their request 
for creation of an all-inclusive donor group.   Key members 
of the G-19 also agreed with many of the arguments espoused 
by the U.S. and others that 1) the G-19 would benefit from 
inclusion of the largest bilateral donor through information 
the U.S. could share from our sources and about our programs 
and the added political weight of the U.S. in policy 
discussions, 2) the opportunity for the U.S. and Japan to 
accompany the process of budget support would help build our 
understanding about the process of implementing that modality 
which might lead to greater interest in providing budget 
support in the future, and 3) U.S. participation with other 
donors in preparing the agenda for political dialogue would 
respond to Paris Declaration principles of increased 
efficiency and to the GRM's formal request.   U.S. 
participation on both the leadership group and the technical 
group formed to negotiate the formation of an all-inclusive 
donor group provided a forum to make these arguments with key 
G-19 actors at different levels.  The decision whether to 
accept the G-19 offer was difficult as the Japanese when 
offered the same opportunity decided not to join, primarily 
because they felt it would undermine the effort to create a 
new, all-inclusive donor architecture.  Post leadership 
carefully reviewed the pros and cons and negotiated a 
commitment from the G-19 leadership to move forward in 
developing an all-inclusive donor group as a condition for 
signing the MOU as an associate member.  The Charge was also 
able to convince the U.N. rep to accept the offer to join the 
G-19 as an Associate Member.  The Charge signed the MOU in 
April 2009, in time for the U.S. to participate in G-19 
meetings to develop the final statement and key messages 
associated with the annual Joint Review of development 
progress and develop the issues for the political dialogue 
held in May. 
 
----------------------------------- 
 
MAPUTO 00000159  003.2 OF 005 
 
 
IMPACT OF G-19 ASSOCIATE MEMBERSHIP 
----------------------------------- 
 
¶9.  (C)  Since April, 2009, the United States has been 
invited to and attended all G-19 meetings of Heads of Mission 
and Heads of Cooperation.  The USAID Director and 
Political-Economic Chief were invited to participate on the 
Governance Platform created by the G-19 to provide analysis 
and advice on issues of democracy and governance.  USG staff 
attend the Economist Working Group which plays a similar role 
on economic issues.  Technical staff continue to participate 
actively in sector Working Groups that are autonomous, but 
used by the G-19 for information and analysis.  While the 
process of multi-lateral diplomacy is labor-intensive and 
time consuming, post believes that our participation in the 
G-19 has brought important benefits: 
 
-- Access to information:  The G-19 secretariat and the 
Working Groups that directly report to the G-19 (Economists 
and Governance Platform) carry out studies and analysis that 
provide useful information for donors.   The Joint Review 
process includes information on government budget 
implementation and an analysis of progress toward targets in 
the G-19's Performance Assessment Framework taken from the 
GRM's Poverty Reduction Strategy.  The G-19 also organizes 
presentation from visiting experts and analysts for its 
members.   All of this information is useful to the USG as 
well and can complement our own analysis and sources.  It is 
also useful to know what forms the analytical base for the 
other major donors. 
 
-- Increased understanding of program support modalities: 
Donors in Mozambique have highly developed mechanisms for 
direct budget support and program support through 
sector-specific common funds (sector-wide assistance programs 
or SWAPs).   G-19 members in Mozambique see themselves as 
ahead of most other countries in implementing the Paris 
Declaration as further elaborated in Ghana due to the high 
levels of budget support provided, the mechanisms developed 
to monitor performance, and the number of donors involved in 
some type of program support.  Our participation in the G-19 
gives us an inside view of how well this all works or doesn't 
work that can be valuable as we consider increased use of 
modalities that work with or through government systems. 
 
-- Improved coordination: Our participation in the G-19 and 
access to all of their documentation significantly increases 
our knowledge of what other donors are doing in both their 
program and project assistance.   As we have expanded our 
staff and filled vacant positions we are increasingly able to 
participate actively in sector working groups where 
information about specific activities and programs are shared 
and coordinated.   This allows us to work more effectively to 
complement the work of other donors, avoid duplication, and 
learn from their experience. 
 
-- Influence on key policy issues: USG participation in the 
G-19 through the COM and USAID Director has allowed us to 
engage our donor counterparts directly on issues we believe 
should be at the top of the policy agenda of the donor group. 
 For example, our insistence of the importance of reforms to 
improve the business environment led to inclusion of key 
reforms in summary of the Joint Review and subsequent 
political dialogue meeting with the GRM.  Active USG 
engagement on democracy issues led the G-19 to take a firmer 
stance on electoral issues during the recent elections, a 
political stance which some in the group found uncomfortable 
but which most believed was long overdue.  Our participation 
in these fora has allowed us to be part of both formal and 
informal discussions about how to deal with the election 
irregularities and concerns over governance issues that have 
been recently the center of intensive debate within the G-19. 
 Though we do not provide budget support, which has been the 
focus of much debate locally, our thoughts and positions are 
solicited and have been influential.  In an organization with 
disparate views that operates more or less by consensus, our 
voice and influence with individual members of the G-19 can 
help tip the balance. 
 
--------------------------------------------- --- 
SOME RESISTANCE TO KEY POLICY ISSUES IN THE G-19 
--------------------------------------------- --- 
 
¶10.  (C)  Efforts to develop a more inclusive donor group 
around a high-level meeting with the government as a means of 
putting key policy issues on the table early with the new 
government, have been ongoing since the elections.  A first 
meeting was called in early December by the leadership group 
 
MAPUTO 00000159  004.2 OF 005 
 
 
and was attended by various emerging donors outside the G-19 
(including Brazil, South Africa, India, Egypt, Vietnam and 
Russia) as well as most G-19 members.   Post sees this effort 
as an important process that, in line with Paris Declaration 
principles, aligns and harmonizes all donors, brings 
increased efficiency to donor-GRM relationships, and also 
offers a vehicle for donor coordination and discussion of 
policy issues that is not dependent on providing assistance 
through a particular modality that would offer USG 
participation on an equal footing with all other donors (i.e. 
leadership of the group would not be restricted to budget 
donors).   However, this first meeting served to surface 
continued resistance from some key G-19 members, some of whom 
feel that this additional high-level dialogue (currently 
contemplated with the President or Prime Minister) would 
undermine the G-19's dialogue efforts currently carried out 
primarily with the Minister of Planning and Development or 
Minister of Finance.   Post will continue to push for 
development of this new aid architecture. 
 
¶11.  (C)  EU members of the G-19 are also concerned about a 
bureaucratic battle between the member nations and the EU 
Commission's Mission in Mozambique.  Under the leadership of 
EU Representative Glauco Calzuola, the EU Commission has used 
the Lisbon Treaty to frustrate and obstruct previously vocal 
European country missions wishing to engage the GRM more 
fully on democracy and governance concerns.  Many individual 
EU country missions are concerned that Calzuola has used the 
Lisbon treaty to take control of the political dialogue, 
while at the same time disconnecting that dialogue from 
assistance-related dialogues which continue to be managed by 
individual member-states.  Calzuola has also disbanded 
governance-related working groups, among them, the human 
rights working group, in favor of more emphasis on trade. 
Representatives of EU member nations raise private concerns 
that Calzuola may have little will to engage the GRM on 
democracy and governance issues. 
 
--------------------------------------------- ------ 
COMMENT: WILL G-19 PRESSURE RESULT IN A D&G CHANGE? 
--------------------------------------------- ------ 
 
¶12.  (C)  In the aftermath of an election process that 
appears to have been manipulated by the ruling party, on top 
of ongoing governance concerns, the G-19 has struggled with 
the implications for budget support and the resulting 
increased negative attention from capitals.  They agreed to 
send a letter to the GRM indicating that they believe such a 
breach of the underlying principles may have occurred to 
initiate a dialogue to discuss these issues - which has 
caught the attention of top GRM officials.   Some donors are 
concerned that reductions in budget support will undermine 
the use of this modality and will be used by those in their 
capitals and legislatures who question it to further argue 
against it; small donors, in particular, say if their budget 
support levels are cut for political reasons, they will not 
be able to get it restored in the future.  Others, 
particularly the larger budget support donors, argue that 
this is a test of the utility and impact of budget support 
and its ability to leverage change.  The Dutch Ambassador 
recently questioned whether or not the GRM even took the 
donors seriously at all, and if not, then the argument for 
donor support is lost. 
 
¶13.  (C)  The G-19, using direct budget support as a unifying 
theme, had been  permitted over time to dominate the process 
of donor coordination in Mozambique and corner the market for 
multilateral political dialogue.  This EU-centric group 
relished its exclusive position but ultimately understood the 
benefits of expanding membership to include the United 
States, even if we did not provide direct budget support. 
While USG participation in G-19 meetings and various working 
groups is staff intensive and time consuming, there has been 
real payoff in increased influence on the agenda and 
positions taken by the G-19 in their political dialogue with 
the GRM and subsequent actions taken.  As the USG looks 
carefully at the delivery of foreign assistance through the 
QDDR and PSD-7 discussion, and responds to a push for more 
use of government systems, the efforts made to implement the 
Paris Declaration in Mozambique (and the limitations and 
challenges that have become apparent) will be useful 
experiences to evaluate and assess.  In addition, a more 
systematic approach to donor coordination mechanisms with our 
allies in recipient nations would be helpful, as too often 
the local personalities, rather than government policy 
directives, seemed to dictate positions taken by resident 
ambassadors on the form donor coordination mechanisms should 
be established. 
 
MAPUTO 00000159  005.2 OF 005 
 
 
ROWE