VZCZCXRO6431
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHTU #2916/01 3491453
ZNR UUUUU ZZH
P 151453Z DEC 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2353
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUCNMGH/MAGHREB COLLECTIVE PRIORITY
RUEHBJ/AMEMBASSY BEIJING PRIORITY 0073
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 002916 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID EFIN ECIN KDEM TS
SUBJECT: ADB PRESIDENT OPTIMISTIC ABOUT BANK'S FUTURE, WARY 
OF POLITICAL INVOLVEMENT 
 
 
¶1. (U) Summary: During the Ambassador's December 11 courtesy 
call on African Development Bank (ADB) President Donald 
Kaberuka, Kaberuka touched on the differing problems and 
varying situations of African nations and the importance of 
adapting the services provided by the ADB to meet these 
challenges.  In discussing Bank lending to Tunisia, Kaberuka 
cautioned that ADB statutes prevented the institution from 
political involvement but acknowledged that the bank operates 
in a political environment.  End Summary. 
 
¶2. (U) Background:  Kaberuka, former Rwandan Minister of 
Finance and Economic Planning, became President of the 
African Development Bank in September 2005, inheriting an 
institution whose financial stability had been restored, but 
as a small development agency in a field crowded with larger 
donors that faces questions about its ability to address 
Africa's low historical growth.  The ADB temporarily 
relocated to Tunis in 2003 from its then headquarters in 
Ivory Coast.  End Background. 
 
¶3. (U) Meeting Participants: 
 
---- 
U.S. 
---- 
 
Robert F. Godec, Ambassador to Tunisia 
Amb. Cynthia Perry, U.S. Executive Director to the African 
Development Bank 
Victoria Taylor, EconOff, Embassy Tunis (notetaker) 
 
------------------------ 
African Development Bank 
------------------------ 
 
Donald Kaberuka, President 
Sushil Khushiram, Senior Advisor to the President 
Anne Kabagambe, Acting Manager, Office of the President 
 
------------------------ 
Africa at the Crossroads 
------------------------ 
 
¶4. (SBU) In his meeting with the Ambassador, President 
Kaberuka stressed that "Africa is at a turning point" unseen 
in 30 years.  He noted that there are fewer armed conflicts, 
but emphasized that peace and stability remain major concerns 
in countries such as Ivory Coast and Sudan.  Kaberuka also 
stressed the problems of legitimacy and corruption faced by 
many African countries, recognizing that corruption was 
especially acute in newly rich countries without 
well-established agents of restraint.  Debt also remains a 
concern in many countries, some of which have received debt 
relief but are tempted to acquire new debt from countries 
such as China.  Kaberuka highlighted the frustration of many 
African countries with trade negotiations, which have not 
moved forward as hoped.  Despite all the challenges, Kaberuka 
praised the small group of countries who have made headway 
despite being poor in natural resources.  Countries such as 
Cape Verde, said Kaberuka, have managed to achieve growth 
rates of five percent despite their lack of resources. 
 
------------------------- 
Bank to Accelerate Change 
------------------------- 
 
¶5. (SBU) According to Kaberuka, the role of the ADB is to 
accelerate the process of change occurring in Africa.  One of 
the central questions facing the Bank is how to effectively 
deliver development products.  The ADB must focus on what the 
bank does best and must adjust the products and services it 
provides to meet the needs of its recipient countries.  He 
noted that in North Africa the ADB is not a competitive 
source of financing because those countries have many 
available sources of lending from which to choose.  Kaberuka 
stressed that the ADB would like to provide more non-lending 
products, such as policy advice, and would like to promote 
the integration of African economies.  Yet, he also 
acknowledged that the although the ADB's finances were 
"sound", its human resource base remained weak.  Notably, 
Kaberuka did not discuss choosing a permanent location for 
the Bank, which many ADB employees and board members would 
like to see resolved sooner rather than later. 
 
------- 
Tunisia 
------- 
 
TUNIS 00002916  002 OF 002 
 
 
 
¶6. (SBU) Kaberuka acknowledged that the Bank had "done a lot 
for Tunisia," with most projects focused on infrastructure 
and education.  (Note: Tunisia remains among the top 
recipients of ADB lending, despite its comparatively high 
level of economic development.  Tunisia holds approximately 
5.26 billion USD in loans from the ADB.  End Note.)  In 
response to the Ambassador's observation that greater 
political freedoms are needed in Tunisia, Kaberuka merely 
replied "probably" and later noted that the Tunisians "have 
their own way of doing things."  Kaberuka conceded that the 
expansion of Tunisia's middle class had created great 
potential for entrepreneurship which could be recognized with 
greater freedom and openness.  Yet, he stated that Bank 
statutes prohibit the institution from becoming involved in 
political issues.  At the same time, he recognized that the 
Bank operates in a political environment.  Kaberuka 
emphasized that the Bank tries to provide "signals and 
incentives" to help create "agents of restraint" in recipient 
countries while trying to adhere to this mandate. 
 
¶7. (SBU) Comment: Kaberuka appears committed not only to 
tackling internal management issues, such as human resources, 
but also to addressing larger questions about the role of the 
bank and the services it provides.  Although Kaberuka was 
optimistic about the ADB's ability to overcome these 
challenges, the bank's temporary location in Tunis -- now 
entering a fourth year -- remains a major and largely 
unanswered concern for employees and board members.  In 
addition, the ADB's wariness of political involvement is 
inimical to Kaberuka's own recognition of the impact of 
corruption and policy on economic development.  It is 
impossible to separate economics from politics and 
governance, as Kaberuka acknowledged in discussing the need 
to use signals and incentives to encourage countries to 
develop institutional checks and balances against corruption. 
 However, Kaberuka did not elaborate what incentives could be 
used to encourage good governance and was reluctant to 
discuss conditioning lending on governance.  While the ADB 
depends on lending to recipients with excellent repayment 
records to increase net finances, countries like Tunisia that 
are close to attaining the Millennium Development Goals, yet 
eschew political reform, are the least in need of assistance. 
 End Comment. 
GODEC