VZCZCXRO4257
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHAN #0430/01 1230940
ZNR UUUUU ZZH
R 030940Z MAY 07
FM AMEMBASSY ANTANANARIVO
TO RUEHC/SECSTATE WASHDC 4729
INFO RUCNSAD/SOUTHERN AF DEV COMMUNITY COLLECTIVE
RUEHDS/AMEMBASSY ADDIS ABABA 0059
RUEHFR/AMEMBASSY PARIS 0891
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 ANTANANARIVO 000430 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR AF/E AND OES 
ADDIS ABABA FOR REO - LBRODEY 
PARIS FOR D'ELIA 
 
E.O. 12958: N/A 
TAGS: SENV EAGR EAID ECON PGOV PREL MA
SUBJECT:  U.S. FUND SEEKS MADAGASCAR FOREST DEAL 
 
 
ANTANANARI 00000430  001.2 OF 002 
 
 
¶1. (SBU) SUMMARY:  Since a meeting in September, 2006, between 
President Ravalomanana and the president of the Global Environment 
Fund (GEF), a deal to create a 30,000 hectare sustainable forestry 
operation in Madagascar has progressed in fits and starts. 
Interrupted by the December 3 presidential election, a cabinet 
shuffle, and the April 4 referendum, the U.S.-based GEF has 
persistently sought negotiations with the GOM on their proposed USD 
60 million investment.  The deal would create Madagascar's first 
certified forestry company and represent a substantial success for 
the President's vision for sustainable development... if the GOM can 
overcome the bureaucratic obstacles to take advantage of the 
opportunity.  END SUMMARY. 
 
First Meeting During UNGA 
------------------------- 
 
¶2. (SBU) In September 2006, Kevin Tidwell from GEF made an initial 
visit to Madagascar to explore investment opportunities in the 
forestry sector.   In late September on the initiative of the U.S. 
Embassy there was a meeting on the margins of the UNGA between 
President Ravalomanana and GEF President and CEO Jeff Leonard.  This 
seemed a perfect match, bringing the developing country leader 
famous for his "Durban Vision" for conservation together with a 
developed-country investment fund focused on sustainable 
development.  Global Emerging Markets Forestry (GEMF) Investors LLC 
-- co-managed by International Forestry Investment Advisors and GEF 
- thus came to learn that tens of thousands of hectares of 
plantation forest in Madagascar were underutilized, while natural 
forests were under intense pressure of deforestation.  The President 
invited GEF to come to Madagascar to find suitable land for a 
sustainable forestry operation. 
 
Proposed 30,000 Hectares Sustainable Forestry Operation 
--------------------------------------------- ---------- 
 
¶3. (SBU) In the subsequent months after the New York meeting, GEMF 
staff visited Madagascar to find suitable forests for investment. 
With support from the USAID Environment Program and implementing 
partners, GEMF concluded that at least 30,000 hectares of forest in 
eastern Madagascar owned and poorly-operated by a parastatal, 
Fanalamanga, was appropriate for their investment in a 
state-of-the-art certified sustainable forestry operation. 
Unfortunately, the governance and structure of Fanalamanga's Board 
were prone to inaction and the deal stalled on technical details the 
Malagasy side did not have the capacity to address. 
 
New Environment Minister Shows Up... 
------------------------------------ 
 
¶4. (SBU) In February, GEMF staff again visited Madagascar hoping to 
negotiate for a 50-year concession to operate the Fanalamanga forest 
plantation.  Finding obstacles and incompetence among members of 
Fanalamanga's Board, GEMF sought a meeting with newly-named Minister 
of Environment, Water and Forests, Koto Bernard.  The new Minister, 
well-known to the Mission, although perhaps not for proactive 
leadership, avoided the meeting for days.  When news finally 
trickled up to the President, on a visit outside the country, he 
angrily instructed the Minister to see GEMF. 
 
¶5. (SBU) The President's intervention led Minister Bernard to speed 
out to the airport for a one-hour last-minute conversation with the 
departing GEF officer to confirm GOM interest and "rescue the deal." 
 Following that meeting, GEMF reiterated their interest in an April 
12 letter stating the Fund had over USD 350 million to invest in 
sustainably managed forests in developing countries.  GEMF stated 
their intention to acquire a long-term concession on 30-40,000 
hectares of Fanalamanga's plantations, invest up to USD 60 million 
in management and milling operations, and create 2,500 jobs. 
 
...Then Disappears Again 
------------------------ 
 
¶6. (SBU) The April 12 GEMF letter emphasized the urgency of meeting 
to conclude a Memorandum of Understanding and decide on next steps 
and feasibility studies.  GEMF is actively exploring several 
forestry investments in other countries and does not want to waste 
its time if Fanalamanga is a dead end.  With staff in South Africa 
on other business, GEMF requested a meeting before April 25 -- they 
received no reply.  Without constant handholding and encouragement 
from USAID and partners, it is likely GEMF would already have 
abandoned Madagascar. 
 
Presidency Advisor "Coaching" Environment Minister 
--------------------------------------------- ----- 
 
ANTANANARI 00000430  002.2 OF 002 
 
 
 
¶7. (SBU)  In a recent restructuring at the Presidency, longtime 
Mission contact Andry Ralijaona moved from the governance office to 
be a Madagascar Action Plan (MAP) Advisor, responsible for 
commitments in environment, mining, and public security.  When 
contacted in late April, Ralijaona promptly replied to GEMF that the 
GOM remains interested in the investment, because it contributes to 
environmental protection and economic growth exactly in line with 
the MAP strategy.  Ralijaona had already spoken to Minister Bernard 
and confirmed the Fanalamanga Board would be restructured ("cleaned" 
in his words) as soon as possible to establish an entity with whom 
GEMF could quickly conclude an agreement.  The Mission remains in 
close contact with both sides to facilitate communication. 
 
¶8. (SBU) COMMENT:  The next three months are crucial if GEMF 
Investors are to complete a Memorandum of Understanding and begin 
feasibility studies.  The outcome of this deal will be instructive 
on two counts vital to the MAP: whether the GOM can efficiently 
respond to investor interest and whether the reality can match the 
rhetoric on sustainable development in Madagascar.  END COMMENT. 
 
MCGEE