US embassy cable - 04DUBLIN1260

UNCLAS SECTION 01 OF 02 DUBLIN 001260 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID, EFIN, ECON, EINV, PREL 
SUBJECT: IRISH RESPONSE TO DEMARCHE ON UNHELPFUL ODA 
INITIATIVES 
 
REF: STATE 177369 
 
1.  Summary: Ireland is skeptical of innovative financing 
mechanisms for Official Development Assistance (ODA), such as 
the International Financing Facility and global taxation 
schemes.  The Irish Government, however, has not been public 
about its skepticism, due to diverse opinions among EU Member 
States on such mechanisms.  GOI development officials would 
appreciate Department guidance on how the USG intends to 
coordinate with other donors in African countries eligible 
for Millennium Challenge Account assistance.  End summary. 
 
2.  On August 24, Post delivered reftel talking points to 
Frank Sheridan and Thomas Haney, Counsellors for Programme 
Countries and Multilateral Assistance, respectively, in the 
Development Corporation Ireland (DCI, the Department of 
Foreign Affairs (DFA) division responsible for GOI foreign 
assistance).  Julian Clare, First Secretary in the DFA's UN 
Section, also participated. 
 
-------------------------------------------- 
Ireland Increasing ODA, But Skeptical of IFF 
-------------------------------------------- 
 
3.  Ireland shares U.S. commitments to economic development 
and sees conventional forms of Official Development 
Assistance (ODA) as the primary mechanism to redress poverty, 
observed Haney.  He noted that Irish ODA had doubled since 
2000 to reach 0.4 percent of GNP.  The GOI planned further 
increases in ODA, but was uncertain of attaining an ODA level 
of 0.7 percent of GDP by 2007, in keeping with Millennium 
Declaration commitments made by Prime Minister Ahern.  (Irish 
GNP is noticeably lower than GDP, given significant 
productivity by foreign-owned firms in the high-tech sector.) 
 Haney said the GOI had taken serious note of UN assessments 
that an additional USD 50 billion in ODA per year was 
required to achieve Millennium Declaration goals, 
particularly in Africa.  The GOI's impression, he added, was 
that Africa has slipped several notches on the U.S. 
development agenda, given onerous U.S. commitments in Iraq 
and Afghanistan. 
 
4.  Like the USG, the GOI was skeptical of innovative 
financing mechanisms for ODA, such as the International 
Financing Facility (IFF), observed Haney.  He said that such 
proposals were well-intentioned, but failed to address 
important questions, including how IFF-issued bonds would be 
repaid.  More importantly, the IFF proposal distracted 
countries from their Millennium development commitments to 
raise ODA levels.  Haney said that the GOI would not publicly 
oppose the IFF proposal, given diverse opinions among EU 
Member States on the subject.  He mentioned that the UK, 
France, and Sweden supported the IFF idea, while Germany and 
the Netherlands saw the proposal as adding additional 
complexity to ODA financing.  Haney believed that any 
statement by the EU Presidency on the IFF would be a 
lowest-common-denominator pronouncement urging further 
reflection on the proposal. 
 
5.  The UK had specifically pressed Ireland to make funding 
commitments to an IFF-like pilot project in 2005 for 
financing vaccines, noted Haney.  HMG planned to develop the 
project with the Global Alliance for Vaccines and 
Immunization (GAVI), an international coalition of public and 
private partners that is funded primarily by the Bill and 
Melinda Gates Foundation.  According to Haney, the GOI had 
promised to consider the UK's offer, but would likely not 
participate, due partly to uncertainty about GAVI's role.  He 
added, however, that the GOI would not come out publicly 
against the proposal. 
 
---------------------- 
Skepticism on Taxation 
---------------------- 
 
6.  Ireland was even more skeptical of global taxation 
schemes as ODA financing mechanisms, said Haney.  Sheridan 
explained that such schemes would only work if accepted by 
all major economies, which would require impossibly long 
negotiations and cross-border harmonization of tax policies. 
He noted that the Irish Department of Finance viewed tax as a 
sovereign issue and would thus oppose moves toward 
harmonization.  Moreover, proposed global tax schemes had not 
clarified the mechanisms for channeling collected revenues to 
developing countries.  Sheridan argued that global taxation, 
like IFF proposals, acted as an "escape valve" to divert 
international attention from commitments to increase ODA 
levels in accord with the Monterrey Consensus. 
 
-------------------------------------- 
President Lula's World Leaders Meeting 
-------------------------------------- 
 
7.  Haney and Sheridan expected that Prime Minister Ahern 
would decline the invitation to participate in President 
Lula's September 20 World Leaders Meeting on Financing Hunger 
and Poverty Eradication.  The GOI would likely send a 
Department of Foreign Affairs (DFA) representative, though it 
was unclear who.  Sheridan pointed out that Prime Minister 
Ahern planned to appoint a new Foreign Minister in an 
anticipated September Cabinet reshuffle, which would affect 
the availability of DFA personnel for the World Leaders 
Meeting.  Whoever attended, said Haney, would take part in a 
listening mode only.  He added that Ireland saw the meeting 
as an attempt to influence subsequent UNGA discussion on 
Millennium development goals, perhaps even to press for a 
UNGA resolution on innovative ODA financing mechanisms.  A 
UNGA resolution of this sort would be problematic for 
Ireland, since it would force the GOI to make public its 
opposition to IFF-like proposals. 
 
------------------------------ 
Coordination on MCA Assistance 
------------------------------ 
 
8.  The GOI had questions as to how Millennium Challenge 
Account (MCA) assistance would affect ongoing Irish 
development programs in Lesotho and Mozambique, two countries 
identified as eligible for MCA funds, said Sheridan.  The 
GOI, for example, had funded education projects in Lesotho 
for 30 years, but had had difficulties working with the 
Lesotho Government to make the projects successful.  Sheridan 
noted GOI concerns that a significant injection of MCA funds 
into Lesotho would be a "welcome distraction" for the 
Government from other donors' existing programs.  He said his 
impression was that the USG had left MCA-eligible countries 
to drive the process of identifying projects for funding, 
allowing recipient governments to focus on large 
infrastructure programs.  Sheridan mentioned Lesotho's 
possible plans to use MCA assistance for an earlier conceived 
water project that had serious environmental implications. 
He asked whether Post could clarify how the USG intended to 
coordinate with other donors in MCA-eligible countries. 
 
9.  Comment: Post would appreciate, via e-mail to econoff Joe 
Young, any general guidance from MCC or EB/IFD that we could 
provide to Sheridan and Haney on the coordination issue, 
particularly with regard to Lesotho and Mozambique, if 
possible.  Alternatively, it would help if we could suggest a 
contact point in MCC or EB/IFD with whom the Irish Embassy in 
Washington could follow up.  Sheridan mentioned vaguely that 
his office had made an unsuccessful attempt to engage the 
State Department in 2003 on development questions. 
KENNY