VZCZCXRO6327
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSR
DE RUEHVI #0537/01 1251153
ZNR UUUUU ZZH
R 051153Z MAY 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 2506
INFO RUCNMEM/EU MEMBER STATES
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 03 VIENNA 000537 
 
SIPDIS, SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN EAGR AU
SUBJECT: Austria's Declining ODA: Catching Up with 
Reality 
 
REF: 07 VIENNA 2496; 04 VIENNA 868 
 
¶1. (SBU) SUMMARY: Since 2005, Austria's debt 
forgiveness programs have artificially inflated its 
official development assistance (ODA) figures and 
masked recent streamlining of its aid policies. 
Because 2009 marks the end of debt forgiveness for 
Iraq, Austrian ODA is expected to fall by a third 
from its high in 2007.  Although this drop places 
Austria among the stingier donors in Europe, its 
implementation arm, the new Austrian Development 
Agency, has earned a good reputation for its focused 
and effective programs.  Austria's shrinking 
development aid profile is expected to have few 
political repercussions (besides angering NGOs), 
given the public's weak support for aid policy.  END 
SUMMARY. 
 
Note: see cable with graphics at 
https://www.intelink.gov/wiki/Austrian_Develo pment_A 
id 
 
Sharp Drop in Aid 
- - - - - - - - - 
 
¶2. (U) The end of Paris Club commitments for Iraq 
and Nigeria will result in a sharp drop in Austria's 
Official Development Assistance (ODA), even though 
the GOA's 2009 budget maintains bilateral ODA at 
2008 levels.  ODA is expected to fall about 25% from 
2008 levels, which follows a 14% drop between 2007 
and 2008 (according to the latest OECD figures). 
Anton Mair, MFA's head of Development Cooperation, 
estimates that Austrian ODA will have fallen from a 
high 0.50% of GNI in 2007 to around 0.37% this year 
-- which moves Austria from the middle to the bottom 
third among the EU donors. 
 
¶3. (SBU) COMMENT: Mair's estimate that Austrian ODA 
will be 0.37% of GNI in 2009 seems overly 
optimistic, as he assumes that a 2009 debt 
forgiveness program for Togo will pick up some of 
the slack.  However, Austria's share of Togo's debt 
is quite small in comparison to the Iraqi debt.  END 
COMMENT 
 
¶4. (U) This change highlights the restrained 
Austrian approach to development aid more generally. 
Austria had been among the stingier European donors 
with ODA levels around 0.25% of GNI through 2004, 
when as part of a Paris Club agreement, Austria's 
debt forgiveness for Iraq caused its 2005 ODA 
figures to jump drastically.  In 2008, about 44% of 
Austria's $1,681 million in total ODA went to 44% 
for debt relief, 28% oo multilateral institutions 
(EU, UN etc) and a surprising 8% to refugees and 
foreign students living in Austria.  Thus, the GOA's 
discretionary aid has been small. 
 
Targeted and Competent: The Austrian Development 
Agency 
- - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶5. (U) Recent funding issues aside, the GOA has 
successfully reformed its bilateral development aid 
efforts.  Two institutions have been set up: 1) the 
Austrian Development Agency (ADA) in 2004 and 2) the 
Austrian Development Bank in 2008.  The creation of 
the ADA fulfilled a commitment Austria made in 
adopting the Paris Declaration to provide aid more 
effectively - by moving to a more accountable and 
harmonized system using results-based management. 
Unlike USAID, ADA works solely on implementation, 
while policy decisions continue to be the 
responsibility of the Ministry of Foreign Affairs' 
Department of Development Cooperation.  The ADA 
funds about EUR 100 million annually in bilateral 
aid projects in GOA's selected "priority" and 
"partner" countries: 
 
AFRICA: Burkina Faso, Burundi, Ethiopia, Kenya, 
Mozambique, Namibia, Rwanda, South Africa, Tanzania, 
Uganda, and Zimbabwe (avg. project $650,000). 
 
EAST / SE EUROPE: Albania, Bosnia, Kosovo, 
Macedonia, Montenegro, Moldova, and Serbia (avg. 
project $1,000,000). 
 
CAUCASUS: Armenia, Azerbaijan, and Georgia (only 1 
active project). 
 
 
VIENNA 00000537  002 OF 003 
 
 
ASIA: Bhutan and Nepal (avg. project $350,000). 
 
LATIN AMERICA: Nicaragua, Guatemala and El Salvador 
(avg. project $450,000). 
 
MIDDLE EAST: Gaza/West Bank (avg. project: 
$175,000). 
 
¶6. (U) Aside from emergency humanitarian aid, e.g., 
following the 2004 Tsunami disaster, aid projects 
are almost never funded outside of these countries. 
This selection of countries is partially a function 
of historical relationships and partly a reflection 
of GOA philosophy that Austria should target its 
efforts on a handful of smaller countries where its 
limited aid will make a relatively bigger impact. It 
further focuses its effort by funding projects in 
just six thematic areas: water and sanitation, rural 
development, energy, education, good governance, and 
private sector development, but approves projects in 
only three thematic areas per country.  In response 
to pressure from the OECD's Development Assistance 
Committee to focus its efforts even further, GOA has 
recently eliminated Cape Verde, Senegal and Pakistan 
as partner countries and reduced the number of 
thematic areas to two per country.  These 
streamlining efforts and ADA project management in 
general were applauded in a recent evaluation by the 
Global Public Policy Institute which rated the ADA 
among the best European donor agencies. 
 
Filling in the Gap: Austrian Development Bank 
- - - - - - - - - - - - - - - - - - - - - - - 
 
¶7. (U) By creating the Austrian Development Bank 
(OeEB) in 2008, Austria sought to expand its aid 
leverage in the priority countries by underwriting 
risky small business loans.  The bank is a wholly 
owned subsidiary of the KontrollBank (the Export 
Credit Agency of Austria) with EUR100 million in 
guaranteed cover. The bank is authorized to use 
equity capital, as well as subordinated and 
performance-based debt, to support private sector 
projects in developing countries.  In practice, the 
ADA refers projects to the OeEB that don't meet its 
criteria for funding and are too risky for the 
KontrollBank.  The bank's first move in June was to 
invest $56 million of equity capital in the 
Luxembourg-based "European Fund for Southeast 
Europe."  In December, the bank signed a $24 million 
credit line for the ProCredit Bank Georgia for 
micro, small and medium-size enterprises and a $20 
million line for the Central American Bank for 
Economic Integration of for medium and long-term 
private sector projects.  It is too soon to evaluate 
the bank's effectiveness. 
 
Reaction: NGOs 
- - - - - - - - 
 
¶8. (U) As elsewhere in Europe, Austrian NGOs have 
historically been important players on the bilateral 
development scene and feared the ADA and the OeEB 
would add a new layer of bureaucracy that would 
consume more of the limited development budget.  The 
new bureaucracy notwithstanding, the NGOs are still 
involved in a majority of the bilateral projects, 
receiving grants of up to $100,000 per project. This 
year's sudden drop of ODA has compounded the NGO 
community's view that there was 'never enough' ODA. 
According to Ruth Picker from the Institute for 
Social Research and Analysis, NGOS are quite 
critical of GOA now that it is clear that Austria 
will fall far short of its international commitment 
to raise ODA to 0.51 % of GNI by 2010 and to 0.7% by 
¶2015. 
 
Reaction: Political Parties 
- - - - - - - - - - - - - - 
 
¶9. (U) NGO concerns are shared by the two left-of- 
center political parties, the Social Democrats (SPO) 
and the Greens.  SPO spokeswoman Petra Bayr regrets 
the recent drop but claims that Austria still has 
long-term plans to reach the 0.5 and 0.7% goals, 
while opposition Green Party spokesman Ulrike 
Lunacek has criticized the GOA for trying to "steal 
away" from its UN and EU commitments. By contrast 
the far-right opposition parties (the FPO, and to a 
lesser extent the BZO) are openly critical of both 
debt forgiveness and the ODA funds given to 
 
VIENNA 00000537  003 OF 003 
 
 
multilateral organizations because they are beyond 
Austrian control.  The conservative People's Party 
(whose representatives in the GoA are in charge of 
most funding) defends the current path given the 
world financial crisis and its impact on the GOA's 
budget. 
 
COMMENT 
- - - - 
 
¶10. (SBU)  Since 2005, Austria has taken credit for 
increasing its ODA expenditures when that increase 
was more of an accounting anomaly.  More than in any 
other country, debt forgiveness has dominated 
Austria's ODA statistics (the next closest one is 
Italy at 20% of ODA).  Looking behind the numbers 
highlights the restrictive foreign affairs and 
budgeting environment in Austria.  As Professor 
Kunibert Raffer (a leading expert on development 
policy) pointed out, there is very thin public 
support in Austria for development aid specifically 
and foreign operations generally.    END COMMENT. 
 
KILNER