US embassy cable - 03ROME4035

UNCLAS  ROME 004035 
 
SIPDIS 
 
 
AIDAC 
 
FROM U.S. MISSION IN ROME 
 
SENSITIVE 
 
STATE FOR IO A/S HOLMES, EUR/WE, IO/EDA RBEHREND AND SKOTOK, 
E FOR CPENCE 
USDA/FAS FOR U/S PENN, RREIMENSCHNEIDER, MCHAMBLISS AND 
RTILSWORTH 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, D/DCHA/OFDA 
BMCCONNELL, D/DCHA/FFP LANDIS 
NSC FOR JDWORKEN 
 
E.O.  12958:  N/A 
TAGS: EAID, AORC, PREF, EAGR, ECON, KUNR, UN, WFP 
SUBJECT: WFP Response to US Rice Federation letter on WFP 
cereals procurement practices 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY. 
NOT SUITABLE FOR INTERNET POSTING. 
 
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Summary 
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1. (SBU) The USA Rice Federation in its letter dated July 30 
questioned the "transparency" of World Food Program 
procurement tendering practices recommending that 
information such as WFP registered commercial vendors, 
tenders, awards, purchase prices, and country of origin 
should be made public information and made available on 
WFP's web site. In its 29 August 2003 response to the USA 
Rice Federation, routed through the US Mission, WFP lists a 
number of conditionalities and constraints that other donors 
place on their cash grants to WFP. In US Mission's view, 
both WFP Executive Director Jim Morris and Chief of Staff 
Mike Stayton (both American citizens) bring extensive 
experience from the U.S. private sector and are very much 
focused on improving the organization's business practices. 
End summary. 
 
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Text of WFP letter dated August 29, 2003 addressed to 
Ambassador Tony P. Hall, U.S. Mission to the United Nations 
Agencies for Food and Agriculture, in response to USA Rice 
Federation letter dated July 30, 2003 
--------------------------------------------- -------------- 
 
2. (SBU) Herewith the text of WFP's letter: (quote) 
 
"Excellency, reference is made to your letter dated 7 August 
2003 in which you were kind enough to forward the letter 
from the President and CEO of the US Rice Federation 
regarding the purchases of rice undertaken by the World Food 
Programme in the year 2002. 
 
(SBU) As WFP is a voluntarily funded organization, and 
strives to maintain the lowest overhead in the UN system at 
just 7 percent, WFP must use donor funds as efficiently as 
possible.  Therefore, in an effort to maximize procurement 
efficiency, we tender by invitation only to registered 
suppliers who have been pre-screened.  In line with standard 
tendering practices used by NATO and the OECD, we do not 
publish requests for tenders in newspapers or trade 
journals. 
 
(SBU) WFP is making every effort to ensure that the 
registration of commercial vendors is as open and 
transparent as possible.  We take the US Rice Federation 
comments on this topic to heart and will review our current 
registration process and look into ways in which we can make 
the registration process easier on the Internet for any 
supplier who wishes to register as a commercial vendor with 
WFP.  In the meantime, we welcome any US food commodity 
supplier to approach WFP to be registered as a potential 
supplier.  We would advise interested suppliers to log onto 
WFP's public website (www.wfp.org); under "Contact WFP" and 
"Procurement" where they would be directed to send an e-mail 
to Procurement@wfp.org, after which they would be sent a 
Vendor Registration Package.  Once submitted, this 
information is reviewed by the Vendor Selection Committee 
within approximately two weeks.  The supplier is then 
subsequently informed if he has been added to the 
Procurement Roster. 
 
(SBU) While we try to ensure that the tendering process is 
open and transparent, price information submitted by 
suppliers is kept confid ential between the buyer and seller, 
as is the case in all commercial transactions.  This 
process, which is highly monitored, is certified by both 
internal and external auditors and the Joint Inspection Unit 
of the United Nations.  We will however, review if more 
communication with vendors would be helpful to them and 
invite your office to contact our Procurement Branch for HOLMES, EUR/WE, 
IO/EDA RBEHREND AND SKOTOK, 
E FOR CPENCE 
USDA/FAS FOR U/S PENN, RREIMENSCHNEIDER, MCHAMBLISS AND 
RTILSWORTH 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, D/DCHA/OFDA 
BMCCONNELL, D/DCHA/FFP LANDIS 
NSC FOR JDWORKEN 
 
 
more information. 
 
(SBU) As you are aware, the US is our top donor providing 
more than 50 percent of WFP's total contributions, and for 
this we are most grateful.  In fact, USAID's Food for Peace 
Office and USDA are the primary food aid offices within the 
US Government and account for roughly 95 percent of the US 
contributions to WFP, generously providing in-kind US 
commodities to meet humanitarian food needs.  What this 
means is that for 95 percent of the US contribution, the US 
Government directly purchases commodities from US suppliers 
to be used for WFP programs.  In 2002 for instance, together 
with in-kind contributions and international purchases, 
81,000 metric tons of rice for US farmers was shipped to WFP 
operations all over the world. 
 
(SBU) Many donors exercise varying conditions governing 
contributions to WFP.  Canada, for instance, which the USA 
Rice Federation highlights in the letter, provides cash with 
the condition that the funds be used to purchase commodities 
in Canada only.  While this is essentially an in-kind 
contribution, when recorded, it appears as a cash 
contribution.  This also explains why Canada appears as the 
largest recipient of commodity awards.  Moreover, our donors 
also indicate conditions on the use of cash in other ways. 
For instance, many donors like the European Union, specify 
that their cash donations are to be used either for 
international purchases from European Producers, or for the 
local or regional purchase of commodities such as rice, if 
the region for which it is ultimately intended is a rice 
producing area.  It is widely believed that local purchases 
foster the agricultural sector while maximizing the cash 
contributions received, resulting in both timely and cost 
effective purchases as it substantially reduces the 
transport time and cost as compared to importing from more 
distant areas.  To put this into perspective, in 2002, WFP's 
total contributions amounted to U.S. dollars (USD) 1.8 
billion.  Of this, only USD 307 million were made available 
for commercial food purchases, and for the reasons mentioned 
above, 66.5 percent (in value terms) of WFP's total 
purchases were for commodities originating in developing 
countries. 
 
(SBU) In terms of WFP's procurement of rice in 2002, the 
amount of rice procured represented 9 percent of the overall 
1.5 million metric tons (mts) of various food commodities 
purchased by the Program.  Local purchases of rice amounting 
to 46,649 mts were undertaken in 16 different countries, the 
three largest purchases of which occurred in Nepal, Myanmar 
and Cambodia.  A second tranche of 46,819 mts was the result 
of a directed contribution whereby the donor specified the 
procurement modalities.  The remainder of 50,884 mts was 
procured as a result of international or regional tenders, 
which were concluded as follows: 
 
(SBU) Origin:                 Destinations: 
 
-India (24,146 mts rice) - Bangladesh, Sri Lanka, Indonesia, 
Yemen, Palestinian Territories; 
-Pakistan (12,483 mts rice) - Iran, Iraq, Palestinian 
Territories, Congo, Djibouti; 
-Thailand (7,098 mts rice) - Laos, Indonesia, Palestinian 
Territories; 
-Vietnam (4,137 mts rice) - Indonesia, Palestinian 
Territories; 
-USA (3,020 mts) - Honduras/Haiti 
 
(SBU) In the spirit of transparency, WFP distributes 
information about its procurement activities regularly at 
its Executive Board sessions and makes other general 
information available upon request to its member countries. 
On various occasions, the Procurement Branch has 
participated in nationally sponsored trade shows or aid 
seminars where it has presented topics on "How to do 
Business with WFP". 
 
(U) I hope that the responses above adequately address the 
USA Rice Federation's concerns outlined in their letter. 
Should the USA Rice Federation have any additional 
questions, comments or recommendations, please have them 
contact Judith Lewis, Director of our WFP Washington Office 
at (202) 653-0010, or e-mail at Judith.Lewis@wfp.org and we 
will do what we can to ensure that the US Rice Federation 
has the information they need to do business with us. 
Sincerely, Michael Stayton, Chief of Staff, Director, Office 
of the Executive Director and Administration."  End text of 
WFP letter. 
 
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Comment 
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3. (SBU) The U.S. Mission remains very much engaged with WFP 
in assisting this vital UN organization to improve its 
efficiency and overall effectiveness. Both WFP Executive 
Director Jim Morris and Chief of Staff Mike Stayton bring 
extensive experience from the U.S. private sector and are, 
in our view, very much focused on improving the 
organization's business practices. Hall 
 
 
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	2003ROME04035 - Classification: UNCLASSIFIED