VZCZCXRO0065
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHTU #1261/01 2610709
ZNR UUUUU ZZH
P 180709Z SEP 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 3861
INFO RUEHZO/AFRICAN UNION COLLECTIVE PRIORITY
RUCNMGH/MAGHREB COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 03 TUNIS 001261 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB (DIBBLE AND DIZOGLIO) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR AF WATCHERS 
 
E.O. 12958: N/A 
TAGS: EAID EINV XA
SUBJECT: AFDB PRESIDENT AIMS TO REGAIN MEMBER CONFIDENCE 
 
REF: 06 TUNIS 2916 
 
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Summary 
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¶1. (SBU) In a September 11 meeting with EEB PDAS Elizabeth 
Dibble, African Development Bank (AfDB) President Donald 
Kaberuka outlined his vision for the AfDB's future, 
emphasizing the need for greater selectivity and focus in 
Bank lending as well as strong support for the private 
sector.  Kaberuka stressed the importance of AfDB support to 
fragile states and noted strong Board support to quickly 
resolve Liberia's arrears.  In a separate meeting, AfDB Vice 
President Joe Eichenberger lauded Kaberuka's role in 
restoring the Bank's AAA credit rating in the eyes of its 
regional member countries and emphasized that the AfDB now 
has a window of opportunity and pool of good will to 
accomplish its aims.  End Summary. 
 
-------------- 
AfDB Relevance 
-------------- 
 
¶2. (SBU) In a September 11 meeting with PDAS Elizabeth 
Dibble, African Development Bank President Donald Kaberuka 
outlined what he termed "exciting times" in Africa.  Kaberuka 
remarked that one or two countries may achieve the income 
levels that permit graduation, while still others are making 
progress based on strong commodities prices, reforms, and 
improvements in neighboring countries.  Kaberuka emphasized 
that the AfDB is a small player -- ranked 6th in providing 
development assistance to Africa.  Kaberuka noted that he was 
looking forward to a good African Development Fund (ADF) 
replenishment, but that would not drastically alter the 
Bank's resources.  Stating that he did not want the AfDB to 
become a mini-World Bank that tries to solve all the world's 
problems, he remarked that the AfDB should focus on areas 
where it can provide value-added and make a real difference. 
Kaberuka cited the varying needs of African countries, noting 
that those with greater market access (Equatorial Guinea, Sao 
Tome and Principe, and North Africa) do not require financing 
but still want technical assistance.  PDAS Dibble replied 
that responding to differentiated needs is important for the 
Bank's relevance, and that it is important not to try to be 
all things to all countries. 
 
¶3. (SBU) AfDB VP for Operations Joe Eichenberger stressed the 
need for greater selectivity and focus in Bank projects. 
Eichenberger noted many of the new players and participants 
in Africa bring substantial funds and capacities that AfDB 
does not have.  Eichenberger emphasized that the demand side 
has also pushed the Bank towards infrastructure and related 
concerns such as governance.  He recalled that in the past 
the combination of large infrastructure projects and little 
oversight led to "roads with weeds growing out of them." 
Today there is recognition that successful infrastructure 
projects require attention to governance.  Eichenberger added 
that donors also recognize that there was too much emphasis 
on social operations in recent years, citing the poor results 
of the AfDB's human development projects.  He stressed that 
the AfDB must continue to invest in human dignity, given 
Africa's poor human development indicators, but that the Bank 
could best accomplish this by targeting its infrastructure 
projects.  Eichenberger cited projects that would build roads 
to markets and to health facilities as examples.  He hoped 
that the current replenishment discussion would produce a 
real increase in funds that would permit steady investments 
in human development and growth in infrastructure spending. 
 
----------------------------------- 
Fragile States and the "MCC Effect" 
----------------------------------- 
 
¶4. (SBU) Kaberuka stated that the AfDB is increasing support 
to fragile states and that he hopes to speed support to 
countries meeting certain criteria.  PDAS Dibble noted US 
recognition of the need to support fragile states and 
underscored the importance of moving forward quickly with 
Liberia.  PDAS Dibble cited longstanding US advocacy of 
performance-based allocation and US programs that reward 
performance, such as the Millennium Challenge Corporation. 
Dibble highlighted that the "MCC effect" is causing countries 
to consider reforms that could improve their chances of 
eligibility, with countries like Tunisia taking note of the 
MCC's new compact with Morocco.  Kaberuka acknowledged that 
 
TUNIS 00001261  002 OF 003 
 
 
USG policy rewards good performers, but that it must also 
support Liberia and others seeking to transition after 
conflict. 
 
¶5. (SBU) Eichenberger noted that the OECD/DAC has done a lot 
of work on typologies of fragile states.  He told Dibble that 
based on that work, AfDB management decided that it could 
best contribute to post-conflict and post-crisis countries. 
Eichenberger agreed that performance-based allocation is a 
key issue, adding that it was "not only the Americans" who 
support it and even the skeptics "buy it in principle." 
 
----------------- 
Arrears Clearance 
----------------- 
 
¶6. (SBU) Kaberuka noted strong Board support to quickly 
resolve Liberia's AfDB arrears.  Treasury Financial Attache 
Alex Severens noted that Treasury Assistant Secretary Lowery 
has worked hard to resolve this, and that there have been 
positive indications from china, India, the Philippines and 
Korea.  Eichenberger explained that the AfDB has the 
resources to resolve its part of Liberia's arrears, but that 
the 70/30 burden-sharing would stretch the rules of the AfDB 
fund used to clear arrears and there has been Board pushback. 
 Eichenberger expressed hope that the Liberian arrears can be 
resolved before the end of ADF-10, i.e., the end of 2007. 
Severens asked Eichenberger whether Cote d'Ivoire would 
require similar treatment to Liberia, but Eichenberger stated 
the cut-off date was a larger concern for the Ivorians than 
the burden-sharing formula.  Kaberuka told PDAS Dibble that 
the AfDB has presented a proposal for clearing Nigerian Trust 
Fund arrears and that although the President has been very 
understanding, others in Nigeria do not support the proposal. 
 Nevertheless, Kaberuka believes that the Nigerian President 
will prevail and that the arrears can be resolved in the 
coming month. 
 
--------- 
Where to? 
--------- 
 
¶7. (SBU) Kaberuka preemptively answered the location 
question, laughingly noting that he knew Dibble would ask why 
the AfDB is in Tunisia.  He stated that it had not been easy 
for the ADB to operate in Abidjan's crisis, and Tunisia had 
originally offered a temporary place originally for six 
months to one year.  Kaberuka noted that the crisis continues 
unabated, and expressed his desire for Cote d'Ivoire to have 
lasting peace and stability.  He added that the AfDB is 
closely observing the situation in Cote d'Ivoire and the AfDB 
Governors will make a decision next April.  If they vote to 
return, there will be one year of preparation, followed by 
one year for the return process.  PDAS Dibble emphasized that 
the United States also hopes Cote d'Ivoire will achieve a 
lasting and stable peace.  Dibble indicated that the United 
States supports resolution of the AfDB's temporary status as 
soon as possible, but also want the AfDB to be able to serve 
its stakeholders as effectively as possible. 
 
----------------------------- 
Supporting the Private Sector 
----------------------------- 
 
¶8. (SBU) Kaberuka highlighted increased AfDB focus on the 
private sector, including investment climate support.  The 
Bank also seeks to play a catalytic effect for specific 
private sector deals.  He stated that the AfDB would like to 
be a "medium player", with a target of US $1 billion in 
financing.  Dibble agreed that it is important to mobilize 
the private sector without displacing it and cited OPIC's 
approach of focusing on deals that could not be completed 
without OPIC's involvement.  Kaberuka stated that the AfDB 
approach is to balance its portfolio, using low risk deal 
operations to provide a foundation to undertake high risk 
projects. 
 
¶9. (SBU) Eichenberger emphasized Kaberuka's enthusiasm for 
and focus on private sector activities.  In response to 
Dibble's concern that the Bank not take the place of the 
private sector, Eichenberger noted that investors are not 
familiar with Sub-Saharan Africa and mused that there may be 
a value to ADfB participation in making other investors more 
comfortable.  Eichenberger argued that former President 
Kabbaj restored the Bank's credit ranking through minimizing 
risk, but that now is the time for the Bank to use its strong 
 
TUNIS 00001261  003 OF 003 
 
 
reserve position to support the private sector.  Eichenberger 
believes that the AfDB could ramp up private sector financing 
to US $500 to 700 million annually. 
 
--------------------- 
Kaberuka's Leadership 
--------------------- 
 
¶10. (SBU) Eichenberger noted that the AfDB has a window of 
opportunity and a pool of good will due to the respect 
Kaberuka commands internationally.  Emphasizing the 
difference between former President Kabbaj and President 
Kaberuka, Eichenberger stated that Kabbaj believed his 
principal role was to restore the Bank's AAA credit rating 
with international markets and credit agencies.  Some see 
Kaberuka's role as restoring the ADB's AAA rating with its 
regional member countries. 
 
¶11. (U) PDAS Dibble has cleared this cable. 
GODEC