US embassy cable - 03ROME5195

UNCLAS  ROME 005195 
 
SIPDIS 
 
 
AIDAC 
 
FROM U.S. MISSION IN ROME 
 
USDA FOR SECRETARY VENEMAN, U/S/FAS PENN, MCHAMBLISS 
USAID FOR A/NATSIOS, AA/EGAT ESIMMONS, AA/DCHA WINTER, 
DAA/PPC JSIMON 
STATE FOR A/S IO HOLMES, A/S PRM DEWEY, U/S GLOBAL 
DOBRIANSKY, IO/EDA RBERHEND AND SKOTOK 
NSC FOR JDWORKEN 
USMISSION GENEVA FOR AMBASSADOR MOLEY AND USAID NKYLOH 
USEU BRUSSELS FOR USAID/PLERNER 
TOKYO FOR USAID REP 
 
E.O.  12958:  N/A 
TAGS: EAID, EAGR, AORC, PREF, NL, FAO, UN 
SUBJECT: The Netherlands evaluates its extra-budgetary USD 
324.4 million partnership with FAO 
 
 
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Summary 
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1. The Netherlands has just released a comprehensive 
evaluation of its extra-budgetary partnership with the UN's 
Rome-based Food and Agricultural Organization - FAO. The 25- 
month long study, undertaken by the Dutch Ministry of 
Foreign Affairs' Policy and Operations Evaluation Department 
(IOB), reviewed 168 projects valued at USD 324.5 million 
spanning the decade 1990-1999 and found few signs of 
positive impacts on beneficiaries from the 19 projects that 
they investigated in-depth. On achievement of intended 
outcomes, the sample trust fund projects reviewed scored 
"fairly well," (i.e., 65 percent of the project's reviewed 
achieved their objectives), but they showed severe 
shortcomings with respect to economic, financial and 
institutional sustainability, with only 31 percent of the 
sample achieving "satisfactory" or better scores. The 
evaluation concludes with the view that "the challenge to 
the Netherlands now is to take a clearer look at the 
mandate, capacity and strategies of FAO, and to define more 
clearly how they can match up with Netherlands development 
policy and resources." In draft comments for the Dutch 
Parliament, the Minister of Development Co-operation 
stressed the "ill defined nature of The Netherlands-FAO co- 
operation" as a root cause of the trust fund's shortcomings. 
The Minister noted that the reforms instituted by FAO since 
2001 go in the right direction, but underlined that FAO and 
donors need to focus on FAO's areas of competitive advantage 
- normative and regional activities, and should at the 
national level emphasize policy advice over direct project 
implementation. End summary. 
 
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Background 
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2. Since the early 1960s, apart from its regular assessed 
contributions, FAO has received extra-budgetary resources 
from a number of donor countries and other agencies. Extra- 
budgetary funds are mainly (but not exclusively) meant to 
support operational activities. 
 
3. At present FAO employs 3,700 people worldwide, comprising 
1,400 professional and 2,300 general service staff. It 
maintains five regional offices, five sub regional offices, 
five liaison offices and 77 country offices. 
 
4. The FAO Regular Budget (financed by assessed member 
contributions) for the years 1991/92 and 1993/94 amounted to 
USD 680 million per biennium. In the years 1996/97 and 
1998/99 the Regular Budget was roughly USD 650 million per 
biennium, which means that during the second half of the 
1990s FAO was in fact confronted with a negative growth 
budget, in real terms. 
 
5. For many years the United Nations Development Fund (UNDP) 
was by far the most important extra-budgetary "funder" to 
FAO, providing almost 90 percent of these funds in the 1970s 
and 40 percent on the late 1980s. After 1992, however, UNDP 
withdrew almost completely (from USD 108 million in 1993 to 
USD 28 million in 1998) which meant a sudden and sharp 
decline in extra-budgetary funding. 
 
6. However, support for FAO emergency activities (largely 
seeds, tools and related agricultural inputs) has increased 
as follows: 1996, USD 23 million; 1997, USD 23 million; 
1998, USD 21 million; 1999, USD 29 million; 2000, USD 50 
million; 2001, USD 54 million; and 2002 (to November 1), USD 
53 million. Similarly, Oil-for-Food funding for Iraq grew asAT ESIMMONS, 
AA/DCHA WINTER, 
DAA/PPC JSIMON 
STATE FOR A/S IO HOLMES, A/S PRM DEWEY, U/S GLOBAL 
DOBRIANSKY, IO/EDA RBERHEND AND SKOTOK 
NSC FOR JDWORKEN 
USMISSION GENEVA FOR AMBASSADOR MOLEY AND USAID NKYLOH 
USEU BRUSSELS FOR USAID/PL 
 
 
follows: 1996, n.a.; 1997, USD 23 million; 1998, USD 67 
million; 1999, USD 83 million; 2000, USD 120 million; 2001, 
USD 130 million; and 2002 (to November 1), USD 88 million. 
 
-------------------------- 
The Netherlands' evaluation 
-------------------------- 
 
7. In the 1990s, the Netherlands and FAO both supported 
agricultural development in Africa, Asia and Latin America. 
During that decade, some USD 324.4 million of Netherlands 
development funds were spent on this multi-bilateral co- 
operation.  For some years, the Netherlands was the largest 
contributor of this type of development funding through FAO. 
These resources - distinct from the country's assessed 
contribution to FAO's regular budget as a member country - 
were held by FAO as trust funds for use in approved 
projects. 
 
8. Between 1990 and 1999, 110 such projects were undertaken 
in 50 individual countries.  The Netherlands also funded 58 
FAO trust fund projects that were regional or global in 
scope.  Despite the volume of this development spending 
through FAO, the overall trust fund activity had never been 
reviewed in detail.  A systematic assessment of the 
character and quality of this substantial joint co- 
operation, and of its implications for future Netherlands co- 
operation with FAO and developing countries, was (in The 
Netherlands view) "long overdue." 
 
9. The specific purpose of the Dutch Ministry of Foreign 
Affairs Policy and Operations Evaluation Department (IOB) 
evaluation was to undertake an assessment based on a 
representative sample of projects that was financed by the 
Netherlands government during the period under 
consideration. Note. IOB is a unit independent in 
programming, terms of reference, evaluation designs and 
methods. It reports directly to the Dutch Parliament. End 
note. 
 
10. IOB was careful to clarify that "this is not an 
evaluation of FAO, but rather an evaluation of Netherlands- 
FAO trust fund co-operation. As such, it comments on 
strengths and weaknesses in the performance of the 
Netherlands, as well as FAO. It makes less direct comment on 
the performance of the third party in this co-operation - 
the governments of the recipient countries." 
 
11. The IOB evaluation team consisted of two team leaders, 5 
senior consultants, and four junior research assistants. 
Field studies were conducted in Senegal, Bolivia, Zambia and 
in south-east Asia. Note. Senegal (USD 50 million) and 
Bolivia (approximately USD 27.5 million) were the two major 
direct recipients of Netherlands-FAO trust funds during the 
1990s. End note. The evaluation's preparatory phase lasted 
seven months; the proper evaluation took 18 months. 
 
-------------------- 
IOB's Major Findings 
-------------------- 
 
12. Herewith the major findings of the IOB evaluation: 
 
A. Ill-defined Character Of Netherlands-FAO trust fund co- 
operation (Lack of coherent policy and programmatic 
character) - The trust fund co-operation was basically built 
on the perception of FAO as an implementing agency 
facilitating the execution of parts of Netherlands aid 
policy.  Several efforts were made to reformulate the co- 
operation with FAO on programmatic terms guided by an 
explicit overall Dutch policy.  However, all these efforts 
USAID FOR A/NATSIOS, AA/EGAT ESIMMONS, AA/DCHA WINTER, 
DAA/PPC JSIMON 
STATE FOR A/S IO HOLMES, A/S PRM DEWEY, U/S GLOBAL 
DOBRIANSKY, IO/EDA RBERHEND AND SKOTOK 
NSC FOR JDWORKEN 
USMISSION GENEVA FOR AMBASSADOR MOLEY AND USAID NKYLOH 
 
failed. 
 
B. Marginal Impact - Few systematic data or studies were 
found on which to base an assessment of the impact of the 
sample projects.  The four field missions undertaken as part 
of this review focused on this aspect of the assessment but 
found few signs of positive impacts on beneficiaries from 
the 19 projects that they investigated. 
 
C. Sustainability - Overall, the sample trust fund projects 
showed severe shortcomings with respect to economic, 
financial and institutional sustainability. 
 
D. Achievement of objectives - A crude measure of 
effectiveness is whether intended outcomes - that is, the 
project objectives as designed - were achieved.  On this 
measure, the sample projects score fairly well.  Performance 
on gender is adequate, and on environment it is good, with 
65 percent assessed as "satisfactory or better."  Project 
characteristics found to be strongly linked with overall 
effectiveness included good design, good management, and 
strong participation in design and execution by host 
authorities and target groups.  Overall, the study found 
that there is wide variation in effectiveness between 
projects of similar types, and between projects undertaken 
in the same regions and countries. 
 
E. Efficiency - In the mid 1990s, growing pressure from its 
member countries and the deteriorating financial position 
led FAO to embark on a substantial reform program covering 
decentralization, planning, programming and budgeting. 
Although the recent decentralization has not yet achieved an 
optimal use of all FAO's human resources, the organization 
can no longer (in IOB's view) be accused of being a wasteful 
bureaucracy. 
 
F. FAO's comparative advantages - The special value of FAO 
is rooted in its global, multilateral scope and character, 
which means that one notable field of FAO's comparative 
advantage is in activities that cover more than one country. 
Projects that operated at regional or global scale did 
significantly better in terms of outcomes and likely impact 
than those undertaken at national or sub-national levels. 
 
---------------------- 
Evaluation Conclusions 
---------------------- 
 
13. Overall, the evaluation concludes, one can perceive a 
trend in FAO back towards the normative activities that are 
at the heart of its mandate.  After decades when extra- 
budgetary funding overshadowed members' assessed 
contributions and operational activities such as trust fund 
projects seemed to eclipse the largely normative work of the 
Regular Program, FAO is now slimming back down towards a 
greater focus on normative work and the Regular Program. 
 
14. Nevertheless, the Dutch report emphasizes the necessary 
interaction between FAO's normative and operational 
activities.  Too much emphasis on them as separate 
categories of work is unhelpful.  FAO support is still often 
called for at field level, and FAO will always need exposure 
to field realities.  But it is clear that operational work 
will not continue on the scale of earlier decades. 
 
15. The evaluation concludes: "The challenge to the 
Netherlands is to take a clearer look at the mandate, 
capacity and strategies of FAO, and to define more clearly 
how they can match up with Netherlands development policy 
and resources.  This evaluation aims to support that 
assessment.  Perhaps, some 20 years after trust fund 
 
 
projects started, it can contribute to a first clear policy 
statement on how co-operation with FAO can help achieve 
Netherlands development policy objectives.  Any new policy 
statement should acknowledge and plan to exploit the 
comparative advantages that FAO offers, notably in 
supranational work, normative activities and regional 
projects.  Regional projects have been a particularly 
successful field of Netherlands-FAO co-operation that 
current Netherlands policy makes it particularly difficult 
to fund.  There is scope for the Netherlands and FAO to work 
together in tackling some of the Millennium Development 
Goals.  In all their joint endeavors, the two partners need 
to do more to achieve accurate and feasible planning and to 
ensure effective monitoring and evaluation." 
 
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Comment 
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16. We applaud The Netherlands for conducting such a 
sweeping review of their relationship with FAO. The 
development of a clear policy framework for co-operation, 
focusing on FAO's "comparative advantages," seeking a proper 
balance between the organization's operational and normative 
work, and strongly supporting FAO's efforts to develop a 
transparent and flexible monitoring and evaluation system - 
are valuable issues for all of FAO's donors. We are 
disappointed that FAO has not thus far responded in writing 
to the many policy issues raised here, and will strongly 
encourage FAO to give this quality evaluation the highest 
level of senior management attention. Finally, it is clear 
that this evaluation could lessen donor enthusiasm for extra- 
budgetary support to FAO (excluding emergency funding), 
which in turn will heighten the focus (and the pressure) on 
the FAO Regular Budget (financed by assessed member 
contributions).   Hall 
 
 
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 2003ROME05195 - Classification: UNCLASSIFIED