This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 06 OTTAWA 001522 
 
SIPDIS 
 
STATE FOR WHA/CAN 
 
E.O. 12958: N/A 
TAGS: EAID ECON PGOV SENV CA
SUBJECT: NEW FOCUS FOR CANADA'S DEVELOPMENT ASSISTANCE 
 
REF: A. OTTAWA 1282 NOTAL (ISP ON TRADE) 
     ¶B. OTTAWA 1190 NOTAL (ISP ON NORTH AMERICA) 
     ¶C. OTTAWA 654 NOTAL (DEBT RELIEF) 
     ¶D. OTTAWA 324 NOTAL (DEBT RELIEF 
     ¶E. COMMISSION FOR AFRICA) 
 
¶1.  Summary:  Canada is focusing its official development 
assistance (ODA) dollara and will be weaning 130 countries 
from its bilateral aid programs.  The April 19 International 
Policy Statement (IPS) confirms that Canada, will concentrate 
its development assistance dollars on countries that can use 
it most effectively.  Aid will focus on five sectors the GOC 
considers essential to meeting the Millennium Development 
Goals (MDG) and that it believes Canada can support most 
effectively, and all programs will be designed with an eye to 
promoting gender equality.  Within five years, CIDA would 
like 67% of bilateral aid to go to 25 "development partners" 
as programs in other countries are phased out. 
 
¶2.  Although the Prime Minister reiterated the GOC's 
decades-old goal of reaching an official development 
assistance (ODA) level of 0.7% of GNI, from about 0.26% now, 
the GOC has not set a target date.  The new policy statement 
should make it easier to identify areas of bilateral 
cooperation with Canada's International Development Agency 
(CIDA).  End Summary. 
 
More aid money 
-------------- 
 
¶3.  The Development section of Canada's April 19 
International Policy Statement (IPS) contained few surprises 
but attracted a surprising amount of (mainly) positive 
publicity.  Minister Aileen Carroll described the IPS to a 
Senate committee on May 11 as an "exciting process" and an 
"excellent piece of work," that identifies a niche that 
allows CIDA to truly make a difference in the world.  The 
IPS, initiated by Paul Martin on taking office in November, 
2003, confirmed that Canada will continue to increase aid 
levels by 8% a year and still plans to double aid to Africa 
by 2008-09 (from 2003-04 levels). 
 
¶4.  Speaking before the Senate Foreign Affairs Committee, 
Minister Carroll explained that the IPS, in addition to 
continuing the commitment to increase aid levels by 8% a 
year, will accelerate that growth as the fiscal situation 
permits.  Note:  Refs A & B described other elements of the 
four-pronged IPS.  The text of the policy statement is 
available on CIDA's website (among other locations) at 
www.acdi-cida.gc.ca .  End note. 
 
Focus on five sectors and a theme 
--------------------------------- 
 
¶5.  The IPS introduces a "development partner" paradigm and 
specifies five sectors on which Canada's ODA will be 
concentrated.  All ODA will have the cross-cutting theme of 
promoting gender equality. 
 
The sectors of focus are: 
--  good governance, 
--  health (with a focus on HIV/AIDS), 
--  basic education, 
--  private sector development and 
--  environmental sustainability. 
 
The sectors were selected because they: 
--  advance the Millennium Development Goals; 
--  support developing countries' expressed needs and 
priorities; and 
--  are areas in which Canada and Canadians can "add value." 
 
¶6.  To support good governance, CIDA will draw on the new 
Canada Corps, created to "involve Canadians of all ages and 
backgrounds," in partnership with NGOs and the private 
sector, to increase engagement in "governance interventions 
abroad."  The private sector development effort, which is 
relatively new to CIDA, will follow up on the March 2004 
Martin-Zedillo report (the Commission on the Private Sector 
and Development).  Environmental sustainability was 
considered as a crosscutting theme, but was found to be a 
better fit as a separate sector. 
 
More money to fewer countries 
----------------------------- 
 
¶7.  CIDA plans to focus its efforts and resources on fewer 
countries -- 25 "development partners," down from 155 current 
bilateral aid recipients.  (Note:  The target countries are 
listed at the end of this message.  End note.)  The IPS 
expands a policy initiated in 2002 of increasing support for 
countries with the ability to use aid effectively.  The 25 
"development partners" were selected on the basis of poverty 
(generally meaning per capita income of less than US$1,000 a 
year), ability to use aid effectively, and a legacy of 
Canadian involvement.  The number of target countries was not 
pre-set and CIDA managers expected between 20-30 countries to 
qualify.  Of the 25 countries, most are in Africa and 18 have 
per capita income under $500 per year.  Programs in current 
aid recipient countries that are not target countries will be 
gradually phased out over time, but may continue to receive 
Canadian assistance through multilateral funding. 
 
What if you don't make the cut as a development partner? 
--------------------------------------------- ---------- 
 
¶8.  The 25 "development partner" countries are expected to 
receive two-thirds of bilateral development assistance funds 
by 2010 (up from 42% now), but the other 130 current aid 
recipients won't be abandoned.  The remaining third of 
bilateral aid funds will cover assistance to failed and 
fragile states (Afghanistan, Iraq, Haiti, Sudan) and ongoing 
bilateral relationships with countries that don't qualify as 
development partners, but in which Canada has a strategic 
interest.  Some current aid recipient countries (such as 
Thailand) are expected to graduate to middle-income status 
and the relationship will evolve from one of assistance to 
cooperation on mutual interests.  Other countries will 
continue to receive Canadian aid that is funneled through the 
multilateral organizations as bilateral relationships end. 
Multilateralism is a theme throughout the IPS, and 
multilateral organizations currently distribute about 40% of 
GOC aid. 
 
The 0.7% Solution:  Someday? 
--------------------------- 
 
¶9.  Most press attention focused on the target of 0.7% of 
gross national product (GNI) for ODA, and the fact that the 
GOC did not commit to a date for reaching that target.  The 
issue has particular resonance in Canada because former Prime 
Minister Lester Pearson introduced the 0.7% target.  The IPS 
restates the GOC's long-term commitment to reaching the 0.7% 
of GNI goal, but acknowledges that Canada is not at that 
level.  Martin, in his pre-release statement on April 18, 
reiterated support for the 0.7% of GNI goal, but stressed 
that Canada is not "in a position to make an unalterable 
guarantee as to that it will hit that target by 2015." 
 
¶10.  International Cooperation Minister Aileen Carroll (the 
head of CIDA) made similar statements to parliamentarians and 
in news interviews.  In response to a senator's query about 
whether Canada wouldn't set a better example by identifying a 
date to meet the 0.7% target, Carroll agreed that quantity is 
important, but stressed that how Canada gives is, too. 
According to the OECD, Canada's ODA increased 12.2% in real 
terms from 2003-2004, reaching about 0.26% of GNI. 
 
¶11.  Media reports juxtapose the GOC's position with Canada's 
solid GDP growth, large annual fiscal surpluses, and the fact 
that 11 other countries, many of them less prosperous, have 
made a commitment to the 0.7% target.   When economist 
Jeffrey Sachs visited Canada last year, the media focused on 
his bemused response to the GOC's explanation that Canada 
could not boost its GDP percentage of foreign aid because the 
economy is growing too fast. 
 
¶12.  Canada takes a leading role on development assistance 
and is active in calling for debt relief for poor countries 
(refs C & D), but officials have trouble breaking through the 
press, public and politicians' attachment to the 0.7% target. 
 CIDA officials reiterated that Canada has gone beyond its 
Monterrey promise, and they are confident they can do what 
they have announced. 
 
Bad timing, but robust policy 
----------------------------- 
 
¶13.  CIDA distributes about 70% of Canada's ODA, with the 
rest funneled through programs managed by the departments of 
Finance (to IFIs), Foreign Affairs and other agencies.  With 
155 recipients, Canada had the most dispersed aid program of 
all donors.  Over time, an increasing share of funding to 
development partners will be direct budget support (although 
CIDA would not be comfortable providing budget support in all 
cases). 
¶14.  Canada's 2005 budget, tabled in March, called for an 
increase in development assistance of C$3.4 billion (about 
US$2.7 billion) over five years with the goal of doubling 
assistance from 2001-02 levels.  That continues the past 
years' commitment to increasing aid by 8% a year, with half 
of that increase going to Africa, and includes C$172 million 
(about US$138 million) for an initiative (announced in 
February) to provide 100% debt relief over the next five 
years for poor countries (Refs C & D).  The opposition 
parties to the right and left of the government have both 
called for increases in Canada's ODA and endorsed the 0.7% 
target. The IPS commits 5% of Canada's R&D spending to 
research into development challenges. 
 
¶15.  Unfortunately, release of the IPS coincided with an 
outburst of political gamesmanship as the ruling Liberal 
Party and the Opposition parties tussled over the future of 
the Liberal minority government.  The government's successful 
maneuvering to avoid a no-confidence vote over the budget 
included a deal with the much smaller NDP to increase 
spending on social issues, including an additional C$500 
million over two years for foreign aid.  Yesterday's 
successful passage of the budget will both avert immediate 
elections and provide a welcome increase of an additional 8% 
a year for CIDA. 
 
¶16.  When asked about the prospects for the policy statement 
should an election be called (which is still possible in the 
fall), CIDA officials said that they consider this document 
to be robust.  The IPS reflects international (and Canadian) 
consensus on the key development problems, and it supports 
the MDG and the Paris Declaration on aid effectiveness, which 
have widespread political support. 
 
All publicity is good publicity? 
------------------------------- 
 
¶17.  CIDA officials were pleasantly surprised by how positive 
the reception of the development section of the IPS has been. 
 The outline of the development policies has been known since 
January, but the list of target countries was new.  On the 
IPS's release, a high percentage of media coverage touched on 
the development segment, with the list of partner countries 
and the debate over 0.7% gaining the most attention.  Private 
sector partners have been positive, with very little 
pushback. 
 
¶18.  CIDA cited the effective "interdepartmental effort on 
electronics" (use of the Internet) as an asset in spreading 
the word on the IPS.  Traffic on CIDA's website was up by 50% 
when the IPS was released, but there were very few phone 
calls or e-mails to Public Affairs, indicating that people 
were finding the information they needed on line. 
 
Inter-agency coordination 
------------------------ 
¶19.  When asked about the IPS's interagency process in 
coordinating international policy, CIDA officials point out 
that the links between the "3 Ds" (Diplomacy, Development, 
and Defense) are most clear in the crisis countries such as 
Afghanistan and Haiti, and emphasized that such coordination 
will continue.  The IPS calls for a "whole-of-government" 
approach to development that will coordinate policy on issues 
such as debt relief, trade, and environmental problems with 
other agencies. START, the newly-created Stabilization and 
Reconstruction Taskforce led by Foreign Affairs Canada, will 
supplement the current coordination among ministries with a 
physical office at FAC, staffed by representatives from each 
agency.  It will be backed up by CIDA's new "Canada Corps" of 
private sector experts. 
 
 
¶20.  The formal policy coordination process is through the 
Global Affairs cabinet committee, backed up by committees at 
the Deputy Minister and the Assistant Deputy Minister level. 
The IPS also commits the GOC to provide an annual 
international policy update to parliament, in which CIDA will 
participate. 
 
Overlap with MCC 
---------------- 
 
¶21.  Like the Millennium Challenge Account, the IPS sets the 
goal of channeling development dollars where they will do the 
most good and involving recipient countries in designing 
programs.  Nine Millennium Challenge Account countries are 
also target development partners for Canada.  Seven current 
MCA countries (Armenia, Georgia, Lesotho, Madagascar, Morocco 
and Vanuatu) are not on Canada's list.  However, recipients 
of GOC aid play a less active role than in the MCC and there 
is no separate funding for development partners. 
 
Comment 
------- 
 
¶22.  Preparing the IPS was a grueling process for the GOC, 
but perhaps less so for CIDA than for the other international 
affairs agencies.  It has a clear mandate with strong 
domestic consensus on its role and continued in a direction 
it chose three years ago.  Morale is good, despite pressures. 
 However, all is not necessarily rosy. 
 
¶23.  When asked by Senators on May 11 about complaints that 
CIDA officials are risk averse, Carroll confirmed in strong 
terms that they are "pathologically risk averse," and 
"terrified of the Auditor General."  She pointed out that 
continued criticism, such as CIDA receives from the Auditor 
General, leads to increased levels of auditing and 
accountability at the expense of flexibility.  She wants to 
"deprocess a marvelous agency," and referred to a 
conversation she had just had with former U.S. Senator George 
Mitchell, who was in Canada pursuing UN reform, about the 
need to get more decision making authority to CIDA reps on 
the ground and to get more CIDA personnel out in the field. 
Our CIDA contacts are tremendously impressed with Minister 
Carroll, citing her energy, concern for staff, and efforts to 
create an open and collaborative work environment.  There is 
strong support at all levels within CIDA for the IPS's goals. 
 
¶24.  List of 25 Canadian Development Partners 
--------------------------------------------- 
 
Africa:  Benin, Burkina Faso, Cameroon, Ethiopia, Ghana, 
Kenya, Malawi, Mali, Mozambique, Niger, Rwanda, Senegal, 
Tanzania, Zambia 
Americas:  Bolivia, Guyana, Honduras, Nicaragua 
 
Asia:  Bangladesh, Cambodia, Indonesia, Pakistan, Sri Lanka, 
Vietnam 
 
Europe:  Ukraine 
 
 
 
 
 
 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
DICKSON