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FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC 7713
INFO RUEHNJ/AMEMBASSY NDJAMENA 1501
RUEHFR/AMEMBASSY PARIS 1850
RUEHLO/AMEMBASSY LONDON 1605
RUEHMA/AMEMBASSY MALABO 0226
RUEHLC/AMEMBASSY LIBREVILLE 1540
RUEATRS/DEPT OF TREASURY WASHDC
RUEHZK/ECOWAS COLLECTIVE
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 03 YAOUNDE 000599 
 
SIPDIS 
 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR AF/C, EB/IFD/OMA 
DEPT PLEASE PASS TO USTDA FOR PIERCE DAVIS 
EUCOM FOR J5-A AFRICA DIVISION AND POLAD YATES 
PARIS AND LONDON FOR AFRICA ACTION OFFICERS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EAID ENRG CM
SUBJECT: CAMEROON ONE YEAR AFTER COMPLETION POINT 
 
Ref A Yaounde 132 
Ref B Yaounde 372 
Ref C Yaounde 511 
Ref D Yaounde 442 
 
YAOUNDE 00000599  001.2 OF 003 
 
 
Marked paragraphs are sensitive but unclassified 
(SBU).  Not for distribution outside the USG. 
 
¶1. (SBU) Summary.  April 28 marked the first 
anniversary of Cameroon's approval for debt relief 
under the Heavily Indebted Poor Countries (HIPC) 
Initiative, which triggered an estimated $2.65 billion 
in debt relief between 2006 and 2015.  While the 
Government of Cameroon (GRC) has undertaken some 
important steps, the overall balance is largely one of 
half-measures and as-yet unrealized potential.  End 
summary. 
 
----------------------------------- 
Completion Point: Financial Fallout 
----------------------------------- 
 
¶2.  (U)  According to the IMF, the forgiveness of USD 
1.267 billion in debt (1999 terms) under the HIPC 
process reduced Cameroon's future debt service 
payments by about $4.9 billion in nominal terms. 
 
¶3.  (U) For the first time in many years, the 
Government of the Republic of Cameroon (GRC) is 
unquestionably in a financial position to implement 
its ambitious program to reduce poverty and generate 
economic growth.  Cameroon's three-year economic 
program (Poverty Reduction and Growth Facility or 
PRGF), a HIPC-related conditionality, expires in June 
¶2008.   The GRC is currently in the planning stage for 
the next Poverty Reduction Strategy Paper (PRSP) which 
will focus on fighting poverty through economic 
growth. 
 
¶4.  (U) The most visible component of bilateral debt 
relief is the five-year Debt Cancellation and 
Development contract signed in June 2006 with the 
French Cooperation Agency (C2D) to direct $704 million 
to finance poverty reduction projects in five sectors: 
1) health, and AIDS control, 2) basic education, 3) 
infrastructure, 4) agricultural development and food 
security and 5) environment.  The impact of the C2D 
projects is already visible through a number of high 
profile infrastructure projects in Douala and Yaounde. 
 
¶5. (U) To respond to public impatience to reap the 
benefits of debt forgiveness and to ease the burden of 
inflation, the GRC in September 2006 reduced taxes 
levied on certain imported staple commodities like 
rice, sugar, and fish.  Also, the GRC reduced the 
charges consumers need to pay in order to connect to 
the water and power networks, contributing to improved 
living conditions through higher purchasing power. 
 
------------------- 
The Social Dividend 
------------------- 
 
¶6.  (U) The benefits of debt forgiveness are intended 
to boost pro-poor and pro-growth spending.  Cameroon's 
FY07 budget (Refs A and B) includes significant 
increases to ministries providing critical social 
services; four of the five largest line items are for 
secondary education (up 12% to $333 million), public 
works (up 83% to $266 million), basic education (up 
38% to $242 million) and health (up 60% to $210 
million).  The GRC has also announced it will add 
13,300 new teachers at the elementary education level 
through regularized temporary contracts.  In addition, 
the health sector will benefit from the recruitment of 
an addition 1,500 new personnel. 
 
------------------------- 
 
YAOUNDE 00000599  002.2 OF 003 
 
 
Macroeconomic and Private 
Sector Developments 
------------------------- 
 
¶7.  (U) In line with President Biya's public promises 
to energize Cameroon's economy, the next PRSP will 
focus on the private sector as an engine of economic 
growth and poverty reduction.  Prime Minister Inoni 
and Minister of Economy and Finance Polycarpe Abah 
Abah have undertaken initiatives to engage the private 
sector in plans to reduce the barriers and increase 
the stimulus for economic growth.  These overlapping, 
and perhaps competing fora have yet to produce 
concrete results, but the Prime Minister has promised 
action to implement the recommendations that sub- 
sector working groups are supposed to submit to him 
later this year. 
 
¶8.  (U) Many are hopeful that the Douala Stock 
Exchange will play an important role in generating 
capital to involve local entities in a number of the 
privatization processes begun during the campaign for 
completion point and since stalled in the bureaucracy. 
To date only the shares of the Cameroon Mineral Water 
Corporation held by the National Investment 
Corporation (SNI) have been traded at the Douala 
financial market. 
 
¶9. (U) The fate of national telecom provider CAMTEL is 
still unclear and made murkier by a number of 
agreements signed between the parastatal and 
multinational firms that would appear to contradict 
pledges that it will no longer draw on the public 
treasury.  A technical partnership agreement with 
China's Huawei Company, for example, deployed CDMA 
(Code Division Multiple Access) technology to build a 
new QCT PhoneQ network to compete with other mobile 
operators, boosting the number of subscribers and 
perhaps making CAMTEL more attractive for potential 
buyers.  Also, the availability of the INMARSAT 
undersea cable at the Douala port, in conjunction with 
the optical fiber laid along the Chad-Cameroon 
pipeline will provide develop Cameroon 
telecommunication infrastructure. 
 
¶10. (U) The privatization of CAMAIR, also a completion 
point conditionality, will be re-launched after the 
April 4 announcement (Ref C) that an earlier tender 
process was Qunfruitful.Q  National postal agency 
Campost, also tapped for reform by the IMF and World 
Bank, entered into a financial services agreement with 
the Canadian company Tecsult.  The Inter-communal 
Investment Fund (FEICOM) which has been a locus of 
embezzlement in the past, has been restructured to 
focus on its core activity of lending to 
municipalities to finance infrastructure investments. 
Cocoa parastatal agency Sodecao activities received 
financial support to renew the aging nurseries and 
better seedlings that will be more disease resistant. 
 
¶11. (U) The GRC has elaborated a long-term development 
plan to boost energy supply to about 10,000 megawatts 
to cater for the demands of a growing population and 
economic development.  That plan hinges on a number of 
projects including: 
 
- The project to construct a new hydro-power plant at 
Nachtigal on River Sanaga 
 
- The construction of a thermal power station at Kribi 
with a capacity of 150 megawatts; 
 
- The project to build the Lom Pangar storage dams, 
the feasibility studies of which are underway; 
 
- The project to build the Memve'ele dam (The UK's 
Globeleq and China's Sinohydro have been short-listed 
to win this project). 
 
YAOUNDE 00000599  003.2 OF 003 
 
 
 
---------------------- 
On the Political Front 
---------------------- 
 
¶12. (U) The last 12 months have witnessed some 
important political developments, many of them linked 
to Cameroon's effort to attain completion point. 
During the June 2006 Parliamentary sessions, the 
deputies adopted landmark laws relating to the 
elections of senators and regional councilors as well 
as the declaration of assets and personal property in 
an effort to introduce greater transparency in public 
management, but the President has not yet issued the 
decrees needed to implement these laws. 
 
¶13. (U) In an added effort to combat corruption, 
President Biya on March 11, 2007 appointed the twelve 
members of the National Anti-corruption commission 
(Ref D), but this body is not yet operational and its 
mandate remains undefined.  A new criminal procedure 
code, generally lauded for successfully integrating 
the contradictory legal systems in the French and 
Anglophone regions, entered into force on January 1, 
2007, but is still not fully implemented. 
 
------------------------------------- 
Comment: Great Promise, Slow Delivery 
------------------------------------- 
 
¶14.  (SBU) The tremendous resources freed by debt 
forgiveness have empowered Cameroon to undertake 
massive pro-poor investments.  Broad initiatives have 
been launched in health, education and infrastructure. 
The HIPC process succeeded in relieving Cameroon's 
crushing debt burden and shifting the onus for 
financing development to the government.  The ultimate 
test for the debt relief process, however, is the 
success in delivering concrete improvements on the 
ground.  It is still too early to make the call in 
Cameroon's case, but pervasive problems of bad 
governance, weak political will and rampant corruption 
have thus far impeded more rapid progress.  End 
Comment. 
 
MARQUARDT