US embassy cable - 05ROME1821

UNCLAS  ROME 001821 
 
SIPDIS 
 
 
STATE FOR IO FOR TERRY MILLER; IO/EDA FOR BEHREND AND 
KOTOK 
USDA FOR BOST AND BUTLER; FAS FOR REICH AND HUGHES 
USAID FOR FFP LANDIS AND SKORIC 
 
FROM THE U.S. MISSION TO THE UN AGENCIES IN ROME 
 
E.O. 12958: N/A 
TAGS: AORC, EAGR, EAID, FAO, WFP 
SUBJECT: RESOURCES AND THE FAO: ACHIEVING RESULTS AND 
COMMON CAUSE 
 
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Summary 
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1.  Ten years of zero nominal growth budgets at FAO have 
resulted in a greatly downsized organization.  FAO is 
more efficient and modernized in many respects.  But 
there is no evidence of an increased prioritization or 
significant improvement in the organization's 
effectiveness.  Simply put, FAO has no member state 
mandate to achieve a more focused program within the 
parameters of agreed priorities.  Despite repeated 
governing body efforts, there has not been, nor is there 
likely to be, an agreed set of priorities within the 
status quo arrangement.  To break this logjam requires a 
different approach from merely tight budgets:  one 
predicated on improved member relationships, greater 
confidence, and the use of political tools tailored to 
facilitate results in the zero-sum program scenario. 
 
2.  The independent external evaluation (IEE) currently 
being developed by an intersessional working group of 
the FAO Council seems to have promise in this latter 
regard.  The IEE has already produced improvements in 
the political atmosphere among the major regional 
groupings.  US leadership in this area is now welcomed 
and even expected, and our opinions widely respected. 
Nevertheless, the consensus remains fragile and is ever 
susceptible to doubt and suspicion.  We are careful to 
avoid the perception that we are promoting the 
evaluation as a means to justify further budget cuts. 
 
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Ten Years of Zero Nominal Growth 
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3.  As a result of ten years of zero nominal growth 
(ZNG) or near-ZNG budgets, FAO's regular assessed budget 
dropped in real terms nearly 25 percent.  Some of FAO's 
activity in selected areas was sustained by expanding 
extra-budgetary donations that in 2004-5 may reach $650 
million.  Along with various efforts at reform and 
modernization, the organization responded to their tight 
budgets by cutting staff over this period from 5,560 
positions to 3,972, a 29 percent drop.  In making these 
cuts, FAO targeted management:  director-level staff 
dropped 27 percent while junior-level professionals 
increased 42 percent.  Most of the positions lost came 
from headquarters: the ratio of field to headquarters 
staff rose from 18.5 to 27.3 percent over the period. 
 
4.  FAO's weak financial position also stems from acute 
cash flow problems mainly generated by Japan's and the 
US's practice of paying contributions in the last 
quarter of the calendar year.  Over 40 percent of the 
annual revenue is arriving after over 75 percent of the 
expenditures have already been incurred.  With fewer 
reserves available, FAO is now looking at ever-earlier 
borrowing of ever-larger amounts: as much as $40 million 
as early as August in CY 2005.  Aggravating the US's 
awkward position as the one responsible for a good deal 
of the problem is the prohibition against US funding of 
interest associated with external borrowings. 
 
5.  The organization has taken a number of measures to 
absorb the shortfalls, such as outsourcing, office 
automation, and cutting international travel.  Most of 
its programs have also experienced a continued series of 
budget reductions. 
 
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The Dynamics of Focus 
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6.  The ZNG policy, of course, was engineered as a belt- 
tightening exercise meant to motivate streamlining, 
greater efficiency, and greater focus.  We, and many 
other large contributors, saw budget stringency as a 
badly needed incentive for tackling reforms the 
organization had not achieved on its own.  On the 
streamlining and efficiency fronts, there are many signs 
our policy worked.  On focus and prioritization, it 
probably failed. After a decade of negative real growth 
in the FAO budget, we see little evidence that these 
budget stringencies have led to prioritization and 
greater excellence in the organization. 
 
7.  What happened, and is happening, is that the 
 
 
organization, as in any bureaucratic process including 
our own, tended to make resource cuts across the board 
rather than through eliminating programs.  The fault lay 
more in member state dynamics than in the Secretariat, 
in that different perspectives between the G77 and OECD 
groups prevented reaching a consensus on prioritization. 
The Secretariat therefore had no member-state mandate to 
make the changes necessary to enhance focus and 
prioritization.  This dysfunction emanated from 
political disharmony among the member states on 
priorities.  A revealing analogy would be one where 
Congress mandated an annual cut in the State Department 
budget, but where each party and committee had its own 
program they wanted to save from elimination. 
 
8.  With that jagged political interface, the 
Secretariat's latitude for targeted cuts was severely 
 
SIPDIS 
reduced, if not eliminated.  Given the organizational 
parameters of the question, further cuts in and of 
themselves cannot be expected to achieve better 
prioritization.  We can set budget levels that are 
justifiable from the standpoint of US policy, but we 
will not force prioritization by doing so.  We have long 
passed that point, and no one in Rome, including our 
best allies, looks to continued budget stringencies to 
remedy the problem.  It is an unrealistic proposition to 
maintain any longer that continued real cuts in the 
budget level will lead to greater excellence.   We need 
to employ other means. 
 
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Goals and Strategies: What Do We Want? 
--------------------------------------- 
 
9.  There are certainly other justifications for 
stringent budgets, not the least of which is the 
availability of resources that contributors have for 
FAO.  But we need to drive on a separate track to get to 
the base of the problem that prevents FAO from achieving 
greater and more evenly distributed "excellence."  Tight 
budgets for the sake of tight budgets should not 
logically be our goal, in and of itself. 
 
10.  If we agree that the FAO has importance for US 
interests and objectives, what we want from it is the 
most and best product from the resources we have 
available.  If we want to make the organization better, 
we need to find other organizational means to address 
output: the program, itself; what it does well and what 
it does poorly; and what level of program serves 
American interests.  We also need a political process 
that generates a consensus-based mandate to the 
organization. 
 
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The Evaluation and Budget Stringency 
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11.  In that latter regard, the IEE is our best hope. 
Its measurement of the organization's impact should 
allow us to identify areas of comparative advantage.  We 
will then be in a better position to work with other 
member states toward refocusing FAO activities on high- 
impact programs, improving programs that we consider 
desirable but whose impact has been below expectations, 
and eliminating much of the rest.  We can use the 
independent external evaluation to improve the 
efficiency of the organization by establishing baseline 
observations on the effectiveness of current programs. 
 
12.  All OECD Group and most G77 permanent 
representations in Rome seem to want the evaluation to 
accomplish this valuable function.  That said, as has 
been the case with base closings in the US, the many 
stakeholders will not be ready to wheel and deal on 
cutting programs if (1) they don't have political cover, 
and (2) they don't see the process as an honest give- 
and-take effort whose ultimate aim is a better, more 
effective FAO.  The very process of launching the 
evaluation has benefits of its own to the extent that it 
generates closer collaboration between G77 countries and 
ourselves.  "Confidence" is the sine qua non of any 
successful evaluation.  If the permanent representations 
believe we are working toward a mutually agreed 
objective, albeit from different perspectives, we might 
be able to establish a binding prioritization that will 
reshape the organization in a more efficient manner.  We 
have already made great progress unifying member states 
 
 
in a sense of common cause. 
 
13.  There are many lingering fears among both G77 and 
OECD member states that the reason the US is pushing the 
evaluation is to find justification for further resource 
cuts.  We have argued against that notion, saying that 
the evaluation is to provide insight into how resources 
might best be used, without direct reference to the 
volume of resources now employed.  Although over time 
there will be indirect implications for resource levels 
(one way or the other), any explicit, direct linkage 
expressed by us now would jeopardize the fragile 
consensus that holds the evaluation process together at 
this early stage. 
 
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End Note 
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14.  The IEE initiative is the best tool we have at the 
moment to deal with the member state impasse on 
prioritization. That is not to say that we should not 
pursue a policy of budget stringency, nor is it the case 
that no countries support continued fiscal restraint. 
Our allies on the ZNG front are fewer, but still include 
Australia and Japan (taken together, these countries' 
contributions and ours amount to 43% of the assessed 
budget).  To the extent we do continue to push for 
budget stringency, however, we should be transparent and 
straightforward, like the Japanese are, that this is the 
amount of money we have available from Congress.  That's 
that. 
 
15.  We should remember, however, that promoting a ZNG 
stance today differs vastly from taking such a position 
a decade ago.  The knife has already touched bone, and 
further cuts are likely to result in possibly crippling 
cutbacks in programs important to us.  We should also 
remain aware of additional costs associated with forced 
downsizing, such as the 10 million dollars the 
organization expects to need for the termination of 190 
positions that a ZNG budget for 2006/7 is estimated to 
entail. 
 
HALL 
 
 
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	2005ROME01821 - Classification: UNCLASSIFIED