US embassy cable - 03ROME5035

UNCLAS  ROME 005035 
 
SIPDIS 
 
 
AIDAC 
 
FROM U.S. MISSION IN ROME 
 
STATE FOR AS/PRM DEWEY, AS/IO HOLMES, PRM/P, EUR/WE AND 
IO/EDA BEHREND AND KOTOK 
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS, 
PPC/DP, PPC/DC 
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR 
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID 
USUN FOR AMBASSADOR NEGROPONTE AND MLUTZ 
BRUSSELS FOR PRM AND USAID/LERNER 
NSC FOR JDWORKEN 
 
E.O. 12958: N/A 
TAGS: EAID, EAGR, AORC, PREF, KUNR, WFP, UN 
SUBJECT: IMPLICATIONS OF WFP'S ENDORSED BUDGET FOR 2004-2005 
BY ITS EXECUTIVE BOARD AT THE THIRD REGULAR SESSION, ROME, 
OCTOBER 20-24, 2003 
 
REF: (A) ROME 4996 
 
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SUMMARY 
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1. At its third regular session (ref A), the Board took note 
of world Food Program's (WFP) Biennial Management Plan 
budget for 2004-2005, at a level of USD 4.8 billion, an 
increase of USD 1.6 billion (66 percent) compared with the 
2002-2003 original budget estimate of USD 3.2 billion. 
Tonnage wise, the total estimated volume of delivery for 
2004-2005 has been proposed at 8.7 million tons (excluding 
the Iraq Oil-for-Food Program), an increase of 59 percent 
over the 2002-2003 original budget estimate of 5.4 million 
tons. This budget breaks with tradition in being based on 
anticipated needs, instead of past commitments or projected 
donor funding. WFP is already the dominant player in the 
delivery of worldwide emergency food aid (68 percent in 
2002) and now handles 39 percent of all global deliveries of 
food assistance, compared with 31 percent for non- 
governmental organizations (NGOs) and 30 percent supplied 
bilaterally. In U.S. Mission's view, the organization needs 
to reflect upon "how big is beautiful" in its quest for 
program interventions of highest quality and impact. 
 
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Background 
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2. The donor community made unprecedented contributions, 
worth USD 2.1 billion, to WFP's programs in 2003. Compared 
with 2002, overall donor contributions to operational 
activities (excluding the Iraq Oil-for-Food Program) were up 
46 percent. This was driven by major crisis in Iraq, the 
Horn of Africa (Ethiopia and Eritrea), Afghanistan, southern 
Africa and elsewhere. The United States tapped into P.L. 480 
Title II allocations and supplementary funding, the Bill 
Emerson Humanitarian Trust and Section 416 (b) resources. 
 
3. What WFP sought in the budget presentation was 
endorsement of a major expansionist strategy. As per WFP's 
rationale, the budget endeavors to: a) raise funds for 100 
percent of all approved programs, not just a certain 
percentage of each; and b) provide the technical support and 
emergency preparedness capacity to the organization 
necessary to do its work properly. In adopting the needs 
based approach, WFP sought to distance itself from its 
traditional (in their words) "very inefficient way of 
running a business by always playing catch-up." 
 
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The numbers 
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4. WFP's Biennial Management Plan budget for 2004-2005, at a 
level of USD 4.8 billion, is an increase of USD 1.6 billion 
(66 percent) compared with the 2002-2003 original budget 
estimate of USD 3.2 billion. Net expenditures are estimated 
at USD 4.4 billion, an increase of USD 1.47 billion, or 50 
percent, compared to the original 2002-2003 estimate of USD 
2.93 billion. Tonnage wise, the total estimated volume of 
delivery for 2004-2005 has been proposed at 8.7 million tons 
(excluding the Iraq Oil-for-Food Program), an increase of 59 
percent over the 2002-2003 original budget estimate of 5.4 
million tons. 
The budget, which is "zero-based" and "needs driven", 
thereby reflects the resources considered necessary toM DEWEY, AS/IO 
HOLMES, PRM/P, EUR/WE AND 
IO/EDA BEHREND AND KOTOK 
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS, 
PPC/DP, PPC/DC 
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR 
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID 
USU 
 
implement approved activities for 2004-2005, instead of 
focusing, as in the past, on estimated levels of fund 
raising. 
 
5. On WFP's three major programming categories, the USD 3.9 
billion direct operational cost biennium budget (the other 
part being USD 883 million in support costs) breaks out as 
follows: 
 
a) development portfolio - against an estimated 2002-2003 
expenditure of USD 393 million (1.14 million tons), WFP 
projects a 2004-2005 estimate of USD 539 million (an 
addition of USD 146 million). This is a 37 percent increase 
in value terms over the 2002-2003 estimates; 
 
b) protracted relief and recovery (PRROs) - against a 2002- 
2003 estimate of USD 777 million (1.7 million tons), WFP 
projects a 2004-2005 estimate of 2.0 billion (an addition 
of USD 1.29 billion). This is a 158 percent increase in 
value terms over the 2002-2003 estimates; 
 
c) emergency operations (EMOPs) - against a 2002-2003 
estimate of USD 2.2 billion (5.8 million tons), WFP projects 
a 2004-2005 estimate of 1.25 billion (a downsizing of USD 
984 million) This is a 44 percent decrease in value terms 
over the 2002-2003 estimates. 
 
Note. As pointed out by the UN's Advisory Committee for 
Administrative and Budgetary Questions (ACABQ), the 2004- 
2005 budget does not include a provision for major 
emergencies, and that if such emergencies were to occur, the 
funds would need to be raised incrementally. End note. 
 
--------------------------------------------- - 
How WFP plans to resource its 2004-2005 budget 
--------------------------------------------- - 
 
6. WFP assumes that the United States will provide base 
support WFP to the tune of USD 2.2 billion over the biennium 
(USD 1.1 billion per year). Support to major emergencies 
will be additional. The other top nine donors would remain 
at current levels of support. All major OECD donors will be 
expected to contribute USD 2.00 per capita, which will 
generate an additional USD 500 million. Emerging (new) 
donors (e.g., China, India, Brazil, and Russia) will 
generate USD 100 million in contributions. Private sector 
donations will bring in USD 40-USD 50 million. 
 
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Concerns 
-------- 
 
7. WFP's proposed budget is based on its calculation of 
anticipated needs throughout the world, rather than upon 
past commitments or anticipated donor-funding 
availabilities. There is no WFP acceptance of any donor's 
position that "this is as much as we can give." A number of 
donors viewed WFP's proposed substantive increases as both 
overly ambitious and unrealistic. Japan commented "we are 
not in a position to reach the USD 2.00 per capita, as this 
would mean doubling our contribution to WFP." 
 
8. There has been an overall decline in international food 
aid by a third since 1999; with few exceptions (i.e., major 
emergencies), it is clear that food assistance in general is 
less of a donor priority and it remains highly unlikely thatS, PRM/P, 
EUR/WE AND 
IO/EDA BEHREND AND KOTOK 
USAID FOR A/AID, AA/DCHA WINTER, AA/PPC, DCHA/FFP LANDIS, 
PPC/DP, PPC/DC 
USDA/FAS FOR CHAMBLISS/TILSWORTH/GAINOR 
GENEVA FOR AMBASSADOR MOLEY, RMA AND NKYLOH/USAID 
USUN FOR AMBASSADOR NEG 
 
this situation is going to change for 2004-2005. 
 
9. By far the United States has been, is and will continue 
to be the leading donor to WFP. Many donors do not believe 
it is in the interest of the organization to make WFP even 
more dependent on U.S. assistance (presently at 63 percent). 
 
10. The vision of the European Commission and some other 
OECD members for WFP is for a smaller organization working 
exclusively with cash in well-defined and limited "niche" 
circumstances. 
 
11. In these tight budgetary times, WFP must effect cost 
savings through the accelerated closure of ineffective 
programs, make better (more nimble) use of existing assets, 
focus more (on less costly) local hires to staff its 
operations, etc. Note. There was no hint in the proposed 
budget as to what, if anything, would be "shed" in the 2004- 
2005 management/budget plan. End note. 
 
12. Given that WFP's budget is tonnage driven (i.e., it will 
need 8.9 million tons to feed x millions of beneficiaries 
over the biennium), a widespread drought and heat-wave this 
past summer in Europe have witnessed increased international 
cereal prices (particularly wheat), mostly in response to a 
deterioration of prospects for the European crop. Hence food 
aid budgets will probably procure less commodity due to 
price hikes, at least in 2004. 
 
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Comment 
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13. WFP is already the dominant player in the delivery of 
worldwide emergency food aid (68 percent in 2002) and now 
handles 39 percent of all global deliveries of food 
assistance, compared with 31 percent for non-governmental 
organizations (NGOs) and 30 percent supplied bilaterally. If 
the worldwide food aid availability "pie" per annum hovers 
around 10 million tons, this budget if attained, would push 
WFP's market "share" up to 45 percent per annum. It would be 
an even higher percentage if the global food aid "pie" 
shrinks. The organization needs to reflect upon "how big is 
beautiful" in its quest for program interventions of highest 
quality and impact.    Hall 
 
 
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 2003ROME05035 - Classification: UNCLASSIFIED