US embassy cable - 04ROME3590

UNCLAS  ROME 003590 
 
SIPDIS 
 
 
SENSITIVE 
 
STATE EB/ODF (DE MARCELLUS) 
STATE FOR E 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, EFIN, PREL, IT, IZ, IRAQI FREEDOM 
SUBJECT: IRAQ: ITALIAN PLANS FOR TOKYO DONORS' MEETING 
 
REF: A. SECSTATE 196084 
     B. ROME 2902 
     C. ROME 2050 
     D. ROME 1805 
 
This cable is Sensitive But Unclassified.  Please protect 
accordingly; not for Internet publication. 
 
1. (SBU) Summary: Italy may not be able to make its planned 
Euro 10 million disbursement to the International 
Reconstruction Fund Facility for Iraq (IRFFI) prior to the 
Tokyo meeting due to chronic budget difficulties.  Our 
judgment is that this is a matter of timing, and that the 
2004 pledge is not in fundamental jeopardy.  The government 
does, however, plan to announce a new pledge to provide 
election-related assistance, though Italian authorities have 
yet to decide on a figure.  When the disbursement is made, 
Italy will earmark much of its IRFFI pledge for United 
Nations Industrial Development Organization (UNIDO) projects 
related to cottage industry development, small-and-medium 
enterprise, and agro industry rehabilitation.  Embassy will 
continue to press for disbursement at senior levels in the 
run-up to the Tokyo conference.  We also think this issue is 
suitable for any high-level bilateral discussion with Italian 
Finance Minister Siniscalco on the margins of the up-coming 
Fund and Bank meetings.  End summary. 
 
2. (U) Econoff presented ref A points to Gianni Ghisi, Deputy 
Director General for Development Cooperation at the Ministry 
of Foreign Affairs, and Luigi Maccotta, Deputy Director of 
the MFA's Iraq Task Force.  Ghisi will lead the Italian 
delegation to the Tokyo donors conference, which will also 
include Maccotta and perhaps one additional official from 
Italy's Finance Ministry.  Ghisi plans to attend the G-8 head 
of delegation meeting on October 12.  (Note: Embassy will 
double track these points in a meeting September 22 with 
Carlo Monticelli, Senior Director for G-7 and EU Affairs at 
the Finance Ministry, and will report any substantive 
response septel. End note.) 
 
Italy Still Trying to Disburse E10 Million to IRFFI 
--------------------------------------------- ------ 
 
3. (SBU) Ghisi said Italy has not yet managed to disburse its 
planned Euro 10 million ($12.2 million) donation to the 
IRFFI.  Many of the MFA's development assistance accounts 
were frozen over the summer as the Italian government debated 
mid-year cuts to the 2004 national budget.  The MFA's aid 
budget has, our MFA contacts assure us, escaped any cuts this 
year, but the Italian Parliament and the Finance Ministry 
have yet to officially unfreeze the money.  Ghisi and 
Maccotta expressed optimism that Italy would disburse the 
IRFFI donation prior to the Tokyo meeting, but acknowledged 
that there is a possibility they might miss this deadline due 
to further bureaucratic delays. 
 
4. (SBU) (Note: The second part of Italy's 2004 Madrid pledge 
disbursement will come in the form of a Euro 20 million 
bilateral soft loan to the Interim Iraqi Government.  This 
loan also still awaits disbursement due to budget 
difficulties, though Ghisi said he is confident the funds 
would be transferred to Iraqi authorities by the end of the 
year. End note.) 
 
Italy's IRFFI Pledge To Support Cottage and Agro Industry 
--------------------------------------------- ------------ 
 
5. (U) Ghisi said Italy would earmark the bulk of its IRFFI 
contribution for three UNIDO projects: $5 million for a 
program to develop cottage industries in southern Iraq; $2.8 
million towards the rehabilitation of a dairy plant; and $2.8 
million for a project to promote small and medium 
enterprises.  Ghisi said Italy may also contribute Euro 
200,000 to a planning survey of Iraq's agro industry 
reconstruction needs. 
 
Additional Support for Elections 
-------------------------------- 
 
6. (U) Maccotta told Econoff Italy hopes to make an 
 
additional donation for election support.  While Maccotta 
said the government had yet to decide on an amount, much of 
the support will likely come in the form of election-related 
training to take place in Italy. 
 
Delegation Will Report on Other Bilateral Assistance 
--------------------------------------------- ------- 
 
7. (U) The Italian delegation also plans to present an update 
on additional bilateral humanitarian and reconstruction 
assistance beyond the IRFFI donation and the bilateral soft 
loan.  Maccotta said he plans to report on the contribution 
of Italy's military contingent to reconstruction in and 
around Nasiriyah, including the rehabilitation of schools, 
hospitals, and other public facilities.  Ghisi and Maccotta 
will also update donors on several bilateral projects, 
including Italy-funded programs to rebuild the Bukhme Dam, to 
restore marshlands, and provide Iraqi ministries with a basic 
"e-government" intranet system.  (Note: The Euro 10 million 
"e-government" project (ref C) is now moving forward after 
several months of security-related delays. End note.) 
 
Italy's IRFFI Contributions to Remain Steady in 2005 
--------------------------------------------- ------- 
 
8. (U) Looking towards next year, Ghisi said the MFA would 
likely maintain a similar level of Madrid pledge 
disbursement's in 2005--i.e., another Euro 10 million 
contribution to the IRFFI plus an additional bilateral soft 
loan to Iraq of around Euro 20 million. 
 
Comment 
------- 
 
9. (SBU) Our MFA contacts are frustrated with the spending 
freeze and the consequent delay it has created in fulfilling 
Italy's pledge to the IRFFI.  Given the slow speed of the 
Italian bureaucracy, there is a distinct chance that Italy 
will not make its payment prior to the Tokyo conference.  In 
our judgment, however, the 2004 pledge is not in fundamental 
jeopardy.  The Italians view Tokyo as an opportunity to 
inform other donor countries about the totality of the 
Italian contribution to Iraq, including the substantial 
reconstruction and humanitarian work undertaken by the 
Italian military.  End comment. 
 
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	2004ROME03590 - Classification: UNCLASSIFIED