VZCZCXRO8713
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHLS #0312/01 1271343
ZNR UUUUU ZZH
R 071343Z MAY 09
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 6959
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP 0115

UNCLAS SECTION 01 OF 04 LUSAKA 000312 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT PASS TO USTR (BILL JACKSON) 
DEPARTMENT PASS TO USAID (FRANKLIN MOORE) 
 
E.O. 12958: N/A 
TAGS: EAID ECIN ELTN ENRG ETRD WTO XA ZA
SUBJECT: NORTH-SOUTH CORRIDOR CONFERENCE: WILL COMMITMENTS 
CATALYZE COOPERATION AND CREATE CONNECTIVITY? 
 
LUSAKA 00000312  001.2 OF 004 
 
 
¶1.  (SBU) Summary.  Following a tripartite summit in October 
2008, and as part of a pilot Aid for Trade initiative, three 
regional economic communities (RECs) - Common Market for 
Eastern and Southern Africa (COMESA), East African Community 
(EAC), and Southern African Development Community (SADC) - 
organized the high-level and well-attended North-South 
Corridor Conference, held on April 6 and 7, in Lusaka. 
Participants discussed issues and options for the development 
of transport and power systems along the trade corridors 
between South Africa and DR Congo/Tanzania, in order to 
facilitate commerce between eight African countries and to 
improve access to and efficiency of ports in eastern and 
southern Africa.  In particular, the bilateral donor and 
multilateral agencies pledged a sum of USD 1.2 billion for 
the program, including the only new commitment of GBP 100 
million (USD 150 million) over the next five years from the 
United Kingdom's Department for International Development 
(DfID), which sponsored the conference.  Despite high-level 
political will and funding, inadequate strategic direction 
and programmatic coordination within and between eastern and 
southern African countries may impede the development of the 
North-South corridor.  End summary. 
 
Background 
 
¶2.  (U) Most eastern and southern African countries face 
major constraints to trade due to poor infrastructure and an 
inadequate regulatory environment.  These constraints, which 
inhibit productivity and competitiveness, include weak 
transport networks, inadequate power generation, and 
disparate policies.  As part of a long-term vision to 
establish a common market, the three RECs convened heads of 
state and government from their member countries on October 
22, 2008, in Kampala, to discuss infrastructure development 
and regulatory reform for economic integration.  In response 
to the final communique from this tripartite summit, as well 
as the broader Aid for Trade initiative from the Doha 
Development Round, the three RECs launched the North-South 
Corridor Pilot Program to improve road and rail links between 
DR Congo, Malawi, Mozambique, Namibia, South Africa, 
Tanzania, Zambia, and Zimbabwe.  The program also endeavors 
to increase access to ports in eastern and southern Africa 
for greater intra-regional and international trade. 
 
Profile of the conference 
 
¶3.  (U) On April 6 and 7, Zambian President Banda hosted the 
North-South Corridor Conference, organized by the three RECs 
and financed by DfID.  This conference convened over 1,000 
participants, including three other African presidents (from 
Kenya, South Africa, and Uganda), over 20 ministers of 
commerce, finance, industry, trade, and transport from 
eastern and southern African countries, high-level 
representatives from bilateral donors and multilateral 
agencies, and attendees from the private sector.  Franklin 
Moore, USAID's Deputy Assistant Administrator (DAA) for the 
Africa Bureau, headed the nine-member U.S. delegation from 
State and USAID.  The conference began with statements by the 
four African presidents, who collectively characterized the 
need for infrastructure improvements and the role of the 
tripartite process.  Following a 15-minute film presentation 
on the concept of the North-South corridor, a pledging forum 
called upon the bilateral donor and multilateral agency 
representatives, with little warning, to describe how and to 
what extent their organizations would support the program. 
During the next two days, participants engaged in sessions on 
transport, power, and Aid for Trade, as well as a workshop on 
the social impact of increased transportation. 
 
Pledges of commitment and cooperation 
 
¶4.  (SBU) During the pledging session, numerous bilateral 
donor and multilateral agencies offered their financial and 
technical support to the North-South Corridor Pilot Aid for 
Trade Program.  Together, these agencies pledged a sum of USD 
1.2 billion for the program, mostly consisting of 
pre-existing funding commitments.  However, the total also 
includes an additional GBP 100 million (USD 150 million) 
proposed by DfID for disbursement over the next five years 
(with an intent to disburse two-thirds of this new pledge 
within the first two years). 
 
¶5.  (U) With the exception of the UK, other donor countries 
described their support for the development of the 
North-South corridor without making new financial commitments: 
 
LUSAKA 00000312  002.2 OF 004 
 
 
 
--Finland, France, Germany, and the Netherlands will continue 
to support relevant activities in institutional capacity 
building, private sector development, and road construction 
and maintenance.  These countries have channeled much of 
their funding through the European Commission and/or trust 
funds, but are considering the option of contributing to the 
North-South corridor program directly. 
 
--Japan will continue to develop one-stop border posts and 
improve roads and electrical power transmission along the 
North-South corridor through concessional loans, with some 
grant aid/technical cooperation projects. 
 
--United States: DAA Moore said that the USG contributes to 
physical infrastructure development in Africa primarily 
through Millennium Challenge Corporation compacts.  He noted 
that through the compacts, the recipient countries themselves 
determine their funding priorities.  DAA Moore also noted the 
importance of adding value in Africa of goods traded within 
and exported from Africa. 
 
¶6.  (U) The multilateral agencies reaffirmed their existing 
financial commitments to develop the North-South corridor and 
other complementary corridors: 
 
--The African Development Bank committed USD 380 million for 
projects along the North-South corridor.  Additionally, it 
intends to invest USD 160 million on sections of the Nacala 
corridor, which extends from the North-South corridor and 
provides an alternative link to the sea (between Zambia, 
Malawi, and the Nacala port in Mozambique). 
 
--The European Commission committed EUR 115 million (USD 155 
million) directly to the North-South corridor program. 
 
--The World Bank committed USD 500 million for projects on 
the North-South corridor and an equivalent amount for 
projects on other complementary corridors. 
 
Potential for connectivity through transport 
 
¶7.  (U) One technical session included presentations and 
discussion on surface transport issues.  First, the Regional 
Trade Facilitation Program (launched with support from DfID 
in 2003 to strengthen pro-poor trade arrangements and 
institutions in southern Africa) presented its online mapping 
and spatial statistical tool with a Geographic Information 
System interface (available at www.rtfp.org) to analyze the 
components and impacts of regional transport networks. 
Second, SADC proposed and requested funding for its road (USD 
7.4 billion for construction and maintenance over 20 years), 
rail (USD 7.25 million for studies and consultations and USD 
800 million for capital costs), and port (USD 3.55 million 
for studies and consultations and USD 425 million for 
infrastructure improvements in the Dar es Salaam port) 
development projects. 
 
¶8.  (U) During the discussion, DfID urged donor agencies and 
recipient country governments to deepen their partnerships, 
fulfill mutual commitments, and accelerate program 
implementation to mitigate economic losses.  However, 
according to the European Investment Bank, such acceleration 
should not compromise efforts to build sustainability, 
especially through strategic partnerships with the private 
sector.  In response to SADC's proposal of "hard" 
infrastructure development projects, the U.S. led other 
donors to advocate for a greater focus on the complementary 
"soft" infrastructure improvements, such as expediting 
inspections at border posts, examining the role of road 
checkpoints, and strengthening linkages with agribusiness and 
other sectors.  Finally, while EAC reiterated DfID's call to 
accelerate program implementation, it highlighted the lack of 
appropriate institutional arrangements, such as regional 
procurement mechanisms, to absorb donor funding. 
 
Potential for connectivity through power 
 
¶9.  (U) Another technical session focused on power generation 
and transmission.  The Regional Electricity Regulators 
Association (RERA) of Southern Africa, Eastern Africa Power 
Pool (EAPP), and Southern Africa Power Pool (SAPP) described 
major projects supported by donors and the private sector to 
promote and support the energy supply industry, indicating 
the relative abundance of investments, unlike the dearth for 
 
LUSAKA 00000312  003.2 OF 004 
 
 
transport system development.  However, each region faces a 
set of specific challenges.  For eastern Africa, EAPP can 
neither attract nor retain fully qualified staff in its 
Secretariat to carry out and coordinate cross-country 
projects.  According to RERA and SAPP, the electricity supply 
industry in southern Africa cannot product enough power to 
meet the demand in conjunction with the unprecedented 
economic growth.  Consequently, the industry has adopted 
interim measures, such as rationing electricity to conserve 
use for increasing energy efficiency and implementing 
cost-reflective tariffs to attract new investments for 
re-capitalizing current facilities and expanding power 
capacity. 
 
¶10.  (U) During the discussion, the World Bank committed an 
additional USD 570 million over the next five years for 
energy projects in southern Africa and a minimum of USD 100 
million over the next three years for such projects in 
eastern Africa.  Along with these commitments, the Bank 
underscored the need to address tariff reform through 
negotiations with governments.  Both France and Norway 
advocated for future regional projects to build renewable 
energy systems that support "green development" and draw from 
special financing mechanisms.  In particular, Norway 
emphasized the need to build the capacity of the three RECs 
and regulatory authorities to oversee cross-border projects 
and harmonize cross-border energy trading policies and 
practices. 
 
Potential for broader connectivity and cooperation through 
Aid for Trade 
 
¶11.  (U) Given the conception of the North-South corridor 
development as a pilot program under the Aid for Trade 
initiative, the conference concluded with a session, which 
reviewed the sub-regional implementation of this global 
initiative.  The African Development Bank mentioned its 
development of the USD 1 billion Trade Finance Facility 
during 2007 - 2008, characterized its focus on infrastructure 
development (accounting for over 75 percent of trade 
facilitation funding), and proposed the schedule for future 
sub-regional reviews (west Africa in June 2009 and central 
and north Africa during the second half of 2009).  The United 
Nations Economic Commission for Africa (UNECA) identified its 
role in monitoring the flow of official development 
assistance (ODA) and presented key trend data.  Between 2002 
and 2006, while ODA related to Aid for Trade grew by an 
average of 13 percent, it fell behind total ODA (24%) and 
non-trade ODA (28%).  UNECA attributed this lag to the lack 
of coherent strategies and action plans with well-coordinated 
projects to implement Aid for Trade at the country and 
regional levels.  For a donor perspective, the U.S. presented 
its activities through the Millennium Challenge Corporation, 
USAID, and other agencies in support of Aid for Trade in 
Africa, describing the development of infrastructure and 
information technology as the bulk (85%) of trade-related 
foreign assistance funding. 
 
Comment 
 
¶12.  (SBU) The three RECs fulfilled the terms of the final 
communique from the tripartite summit in October 2008, and 
generated the highest level of buy-in from the beneficiary 
countries for the North-South Corridor Pilot Aid for Trade 
Program through the conference.  While donor countries 
acknowledged the need and extended their support for this 
effort, they reached and articulated a broad consensus on 
three main obstacles to complete the effective implementation 
of the program.  First, in terms of strategic direction, 
while the program embraces an ambitious agenda of 
infrastructure development, it does not prioritize regulatory 
reform to minimize rent-seeking behaviors within countries 
and to harmonize standards and policies between countries. 
Such reform will complement and maximize the achievement of 
results from the infrastructure development efforts.  Second, 
in terms of programmatic coordination, the three RECs lack 
the institutional capacity and mechanisms to maintain proper 
oversight of donor funding and to support cross-border 
transport and power projects.  Third, while the three RECs 
have conceptualized the development of the North-South 
corridor as a pilot program for the sub-regional 
implementation of the global Aid for Trade initiative, they 
have yet to capitalize on the program to engage eastern and 
southern African countries individually and collectively in 
the formulation of coherent Aid for Trade strategies and 
 
LUSAKA 00000312  004.2 OF 004 
 
 
action plans. 
 
BOOTH