US embassy cable - 05NAIROBI660

UNCLAS SECTION 01 OF 04 NAIROBI 000660 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR AF/E, AF/EPS, AF/PD, EB/IFD, AND EB/ODF 
USAID FOR AFR/EA 
TREASURY FOR ANNE ALIKONIS 
 
E.O. 12958:  N/A 
TAGS: EAID, ECON, KCOR, KMCA, PGOV, KPAO, KE 
SUBJECT:  DONORS: NO BUSINESS AS USUAL FOR KENYA'S 
CONSULTATIVE GROUP MEETING 
 
REF:  A.  NAIROBI 539 (NOTAL) 
 
      B.   NAIROBI 504 (NOTAL) 
C.   NAIROBI 195 (NOTAL) 
D.   NAIROBI 514 (NOTAL) 
E.   NAIROBI 616 (NOTAL) 
 
1.  (SBU) Summary:  On February 8, World Bank Kenya hosted 
the quarterly meeting of the Donor Coordination Group (DCG) 
at which near consensus was expressed that the planning for 
the April 11-12 annual Consultative Group Meeting (CG) for 
Kenya could not be "business as usual" in light of the 
resignation of the GOK's "Anti-Corruption Czar" John 
Githongo and the Government's lack of commitment to ending 
corruption.  While no decision was reached on whether to 
postpone the CG, the donors will deliver a strong message 
to the GOK.  Sweden will draft a memo from the DCG COMs to 
President Kibaki and Finance Minister Mwiraria.  Following 
the delivery of the memo the signatories will release a 
press statement based on that text.  Donors are also 
concerned over a local news article that Kenya is looking 
for new partners to provide budget support without 
attaching governance conditionality.  A number of donors 
expressed dissatisfaction over the proposed return to Kenya 
of Dr. Jeffery Sachs February 22-25, citing concern the 
visit will provide additional comfort to the GOK that 
donors' continued assistance can be taken for granted.  End 
Summary. 
 
2.  (SBU) On February 8, World Bank Kenya hosted the 
quarterly meeting of the Donor Coordination Group (DCG). 
Following shortly after the resignation of the GOK's "Anti- 
Corruption Czar" John Githongo (Ref A), the discussion 
focused on governance issues and the response from donors 
in light of the planned April 11-12, 2005 annual 
Consultative Group Meeting for Kenya (CG).  The donors were 
unanimous in noting that a strong message must be passed 
quickly to inform the GOK that there can be no "business as 
usual" in preparing for the CG or on the agenda.  A number 
of donors expressed the opinion that the CG should be 
postponed.  Others highlighted this as an opportunity to 
express publicly our joint concern that the Kibaki 
administration is not serious about fighting corruption and 
that the donor community cannot be expected to turn a blind 
eye to this reality when considering what levels of 
assistance to provide Kenya in the coming year.  It was 
also agreed that should the CG go forward as scheduled, the 
interventions from donors should not be limited to progress 
reports on the various sectors, but should be an assessment 
of the GOK's performance as viewed through the governance 
prism. 
 
3.  (SBU) Attending the February 8 DCG were representatives 
from the U.S. Embassy and USAID/Kenya, World Bank, IMF, 
UNDP, U.K and DfID, France and ADF, Sweden, Norway, 
Denmark, Finland, Switzerland, The Netherlands, Germany, 
Canada, and Japan. 
 
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UK Kicks off Governance Discussion 
---------------------------------- 
 
4.  (SBU) UK High Commissioner Edward Clay, whose speech on 
February 2 ramped up the current, very public, debate about 
the GOK's anti-corruption efforts (Ref B), opened up the 
discussion on governance by noting that the Kibaki 
government does not appear to understand how seriously the 
donors are reacting to its lack of tangible anti-corruption 
results, nor recognize that the administration itself is in 
peril from growing public dissatisfaction with the 
government's performance.  Clay noted that in addition to 
the CG, an IMF mission is scheduled for early May to 
conduct a program appraisal.  He concluded that the donors 
should inform the government that a significant change is 
needed in the coming weeks, if not days, if this calendar 
is to be met. 
 
5.  (SBU) The Dutch Ambassador said the GOK needs to 
demonstrate that it merits continued international 
assistance.  She added that it is not true that the GOK is 
lacking resources.  The donor-coordinating group on 
Governance, Justice, Law and Order Sector (GJLOS) reform 
program has provided tremendous support, but still the 
government has nothing to show from its side in terms of 
actually prosecuting cases of corruption.  The Dutch 
Ambassador also struck a chord when noting that it is 
worrisome that President Kibaki has not personally made a 
statement about Githongo's resignation and apparently does 
not see the need to defend his administration against the 
growing chorus of critics. 
 
6.  (SBU) The German Ambassador expressed the opinion that 
it would not be credible for the DCG co-chair, Finance 
Minister Mwiraria, to preside over the CG.  He asserted the 
DCG needs to present a unanimous message to the government 
that, as things currently stand, it would be difficult for 
donors to attend.  The Canadian High Commissioner added 
that it is "surreal" for the CG to discuss further budget 
support when senior Kenyan officials are skimming budget 
allocations for their personal enrichment. 
 
------------ 
What's Next? 
------------ 
 
7.  (SBU) While it was agreed that a strong message needs 
to be delivered from the group to President Kibaki and his 
ministers, no consensus was reached on the future of the 
April CG.  Most donors will be going to capitals for 
further consultations.  Sweden agreed to take the lead in 
drafting a memo from the DCG COMs to President Kibaki and 
Finance Minister Mwiraria.  Following the delivery of the 
memo, the signatories will release a press statement based 
on that text.  As noted in Ref E, as part of this 
coordinated strategy, individual donors and other DCG 
groupings will continue to speak out on corruption issues. 
Later the same day, eight "Like Minded" Donors (Canada, UK, 
U.S., Germany, Japan, Switzerland, Norway, and Sweden) 
released a statement on corruption that called on Kibaki to 
review the GOK's anti-corruption efforts and asked corrupt 
officials to step down.  On February 9, the EU delegation 
in Kenya released a statement expressing concern about the 
GOK's commitment to fight corruption, and announcing that 
future EU funding would be dependent on the GOK's 
"seriousness and sense of urgency in addressing these 
issues."  The same day, the Japanese Ambassador stated his 
country's concern about Kenya as an effective partner due 
to corruption. 
 
-------------------------- 
No Agreement Yet on the CG 
-------------------------- 
 
8.  (SBU) The Japanese Ambassador, along with the World 
Bank, while agreeing with the seriousness of the message to 
be delivered, pointed out the difficulty in scheduling and 
planning for the CG, and noted that much administrative 
work had already been undertaken.  The Swedish Ambassador 
added that the Harmonization, Alignment, and Coordination 
(HAC) subgroup of the DCG had already discussed possibly 
postponing the CG, but was concerned about losing this 
opportunity to deliver a strong message to Kenya.  He also 
noted that the GOK would likely be happy to have the 
meeting postponed so that it does not have to answer 
difficult questions in this forum.  Further, the GOK might 
be able to spin the decision to postpone as an "example" of 
donors not willing to support Kenya and its Economic 
Recovery Strategy. 
 
9.  (SBU) USAID Country Director added that in 1991 donors 
faced a similar situation but decided to go ahead with the 
CG at which the donor community announced their suspension 
of budget support out of concern for poor governance by the 
Moi government.  In his opinion, this was a successful 
outcome for the CG.  (USAID/K also noted that to date the 
USG has not recommitted to budget support for Kenya.) 
 
10.  (SBU) France offered the only dissenting view, statingthat this situation 
calls for a "closer engagement" and a 
"real dialogue" with the GOK before considering any impact 
on the CG. 
 
11.  (SBU) The EU/EC representative indicated that a second 
tranche of budget support before the end of Kenya's fiscal 
year (June 30) is in no way assured given the GOK's 
apparent lack of seriousness about corruption.  He noted 
that one EU program in Kenya is to improve public 
procurement procedures (which have been at the heart of the 
most public corruption cases) and that a team of technical 
experts are scheduled to do an audit of previous tenders to 
assess how the process can be improved.  The EU may request 
that the auditors be allowed to examine one or more of the 
irregular procurements originating from the Office of the 
President. 
 
--------------------------- 
Kenya Turns to Arab Donors? 
--------------------------- 
 
12.  (SBU) A number of participants referenced to a news 
article in that day's Daily Nation newspaper reporting the 
GOK is pursuing new budget assistance from Arab donors, 
citing OPEC, Kuwait, Saudi Arabia, and Arab Bank for 
Economic Development in Africa (BADEA).  Of particular 
interest was the line, "Unlike other multilateral donors, 
Arab funding is free of conditions."  It was noted that the 
GOK will lose additional credibility if it looks for 
additional budget assistance that does not require any 
performance benchmarks.  The World Bank confirmed that most 
Arab donors, including OPEC, are members of the DCG, but 
generally do not attend. 
 
------------------------- 
Jeffery Sachs Will Return 
------------------------- 
 
13.  (SBU) UNDP announced that Special Advisor to the UN 
Secretary General for the Millennium Development Project 
 
SIPDIS 
Jeffery Sachs plans to return to Kenya February 21-24.  He 
will again wear two hats (Refs C and D), first in his 
capacity as the Director of Columbia University's Earth 
Institute and Millennium Village Project, in which he hopes 
to have donors and GOK officials join him in a visit to 
Sauri, his model village in Nyanza province.  Second, he 
again hopes to meet with the DCG to discuss the Millennium 
Development Goals (MDG) and Kenya's status as a "fast- 
track" country for receiving massive amounts of additional 
budget and project assistance.  There was little enthusiasm 
in the room for additional discussions with Sachs at a time 
when the pressing issue for most donors is whether or not 
to suspend or cut assistance to Kenya.  There is a concern 
that Sachs' message will reassure the government that 
donors will continue to provide vital budget support even 
while they complain about corruption. 
 
14.  (SBU) A number of donors also expressed concern that 
Sachs and the MDG project are too focused on benchmarks 
culminating in a specific result in 2015, when it is clear 
that Kenya, and other developing countries, can not achieve 
a sustainable level of growth and development by that date. 
 
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Comment 
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15.  (SBU) Rather than governing effectively, the GOK, 
through its official spokesman and a number of Ministers, 
is spending much of its time justifying the government's 
inaction on corruption and attacking those who speak out on 
the issue.  This disconnect is clear to all of Kenya's 
partners, both donors and Kenyan civil society.  The 
(almost) total consensus in DCG was remarkable, not only 
for the desire to use the planning of the CG as an 
opportunity to reiterate common concerns about the 
direction the Kibaki government is headed, but also in the 
shared indignation that the President and his close 
advisors appear to be taking the donors' goodwill (and 
checkbooks) for granted.  We would expect all countries 
represented (with the possible exception of France) to sign 
a strongly-worded communiqu to Kibaki highlighting that 
the Consultative Group Meeting, if it happens, will reflect 
the group's assessment of Kenya's willingness to be an 
honest and effective partner.  End Comment. 
 
Rowe