US embassy cable - 05DJIBOUTI726

UNCLAS SECTION 01 OF 02 DJIBOUTI 000726 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF AND AF/E 
STATE ALSO PASS USAID 
NAIROBI FOR AID/REDSO 
 
E.O. 12958: N/A 
TAGS: PREL, EAID, SOCI, DJ, UN 
SUBJECT:  UN ENVOY SACHS IN DJIBOUTI FOR MILLENNIUM PROJECT REPORT 
LAUNCH 
 
1.  (SBU) Summary:  In a visit to Djibouti July 27 on the occasion of 
the launch of the second national report on the objectives of the 
Millennium Development Project, UN Special Envoy and Millennium 
Development Project Director Dr. Jeffrey Sachs spoke on the theme 
"towards an entrepot economy."  In his well-accepted speech before a 
Palais du Peuple audience, including heads of missions as well as 
Djibouti's cabinet, Sachs outlined his view of the elements of a 
successful Djiboutian economy, described what was needed to bridge the 
development gap in Djibouti and summarized the Millennium Project's 
strategy for development implementation by 2015.   Ambassador pulled 
aside Sachs after his speech to advise him of the U.S. development 
program in Djibouti and noted U.S. naval plans to lease fuel storage 
space at the key Doraleh port project due to come on line in August. 
End summary. 
 
2. (U) UN Special Envoy and Millennium Project Development Director Dr. 
Jeffrey Sachs visited Djibouti July 27 on the occasion of the launch of 
the second national report on the objectives of the Millennium 
Development Project.  The highlight of his visit was a special 
convocation in the Palais du Peuple in which Sachs outlined to an 
invited audience of Cabinet officials, Chiefs of Mission, NGOs and 
development experts his description of Djibouti's needs to reach the 
Millennium Project's target development date of 2015.  Sachs began his 
remarks by acknowledging that Djibouti faces real challenges in 
achieving the goals of the Millennium Project.  It is a nation, he 
said, of contrast between urgent needs today, a difficult situation 
economically, and tremendous potential for the future.  Yet, he said he 
saw significant efforts by Djibouti's government to make progress 
towards the millennium target year of 2015. 
 
ELEMENTS OF A SUCCESSFUL DJIBOUTIAN ECONOMY 
 
3. (U) Sachs laid out characteristics he expected to see in a 
successful Djiboutian economy in 2015.  They included a dynamic 
entrepot economy involved in trade and finance; an active port handling 
millions of containers annually; and shipping services being provided 
including repair, refueling, and insurance.  He said he also saw 
Djibouti as a future information hub with several fiber optics and a 
functioning telecommunications system.  There would be a flow of 
financial information through a banking sector.  Business headquarters 
would be in place for the Horn of Africa and a tourist industry would 
be based in Djibouti managing a tourist trade from Ethiopia into the 
Arabian Peninsula.  Knowing where one needs to go, he declared, is as 
important as getting there. 
 
BRIDGING THE DEVELOPMENT GAP 
 
4. (U) According to Sachs, Djibouti should move swiftly to accomplish 
the following five elements, if it wishes to bridge its development gap 
 
---Investment in Physical Infrastructure:  Djibouti should focus on an 
effective set of port facilities, a modern city, an adequate power 
supply, roads, and water for industrial use. 
 
---Investment in Human Capital:  Djibouti needs to lead a modern 
entrepot system.  Human capital is built on good health, good 
education, and good job skills development.  All three, he said, are 
deficient in Djibouti.  In education, primary education is spoken of as 
a goal, but it will not be sufficient for the economy the country 
wants.  Djibouti will need to focus on higher education.  Government 
willingness to devote half its budget to education is encouraging 
because it is exactly the kind of commitment that is needed. 
 
---Rural Development:  Djibouti's economy will become more urban but 
the transition has to be made with rural and urban populations. 
 
---Full advantage of the Ethiopian relationship :  Current 
Ethiopian-Djiboutian relations are strategic for both nations. 
Ethiopia is land-locked and Djibouti is likely to remain the primary 
port for Ethiopia if it is sufficiently dynamic.  Every entrepot 
economy benefits from being on the major trading route.  Djibouti will, 
essentially, provide much to an economy of 70 million.  He noted that 
Ethiopia is rising from its slumber and can advance if it pursues its 
politics and policies well.  Djibouti can also benefit from that rise 
through port services. 
 
---Creative use of all national and natural resources:   Sachs used the 
example of Iceland to create an analogy with Djibouti.  He said Iceland 
is now a nation with an average per capita annual income of USD 35,000. 
 It became so by developing its fishing potential with a new 
technology.  It became a refueling stop for airplanes transiting the 
Atlantic from the U.S.   It developed both its tourism potential and 
its geothermal potential.  The similarities to Djibouti are many, he 
said, and he recommended that Djibouti receive experts from Iceland on 
geothermal energy for further discussion.  He also recommended use of 
other Iceland experts to advise the Djiboutian government on economic 
development. 
 
STRATEGY FOR IMPLEMENTATION 
 
5. (U)  Sachs explained the Millennium Project's strategy for 
implementation of its objectives.  First, he said, the strategy 
recommends that each country assess its investment needs in order to 
reach 2015 development.  This would mean assessing what needs to be put 
into the port, schools, clinics, desalination, electricity generation 
etc. 
 
6. (U)  Second, methods of financing need to be examined.  How does one 
pay for what one needs?  Lots of creativity will be needed and ideas 
must include national efforts from communities all the way through to 
the national budget process.  There must also be assistance from the 
international community, which for countries such as Djibouti is a 
necessity. 
 
7.  (U)  Third, there must be relief from debt service of some 
international creditors.  It is unrealistic to expect forward movement 
without it. 
 
8.  (U) Fourth, there must be private financing on a significant scale. 
 Sachs cited the example of private non-profit financing.  Perhaps, he 
said, other institutions of higher learning can be persuaded to invest 
in higher education here, such as a university in India.  The French 
Business School might open a campus.  In addition, private corporations 
and their foundations, such as CISCO or MICROSOFT, might be able to 
assist. 
 
9. (U)  Fifth, Sachs recommended a governance and implementation 
strategy which would have several dimensions.  These dimensions would 
be making sure the whole of society is involved, including women 
playing a leadership role; making sure there is rural and urban 
participation in government with opportunities for advancement; full 
public participation in decision making; and macroeconomic stability 
and rule of law with respect to contracts.  In addition, there must be 
vision and leadership as a way to help society see that a way out of 
poverty is achievable and that all parts of society can contribute. 
 
10. (U)  Sachs concluded by saying that he was optimistic for Djibouti, 
based on his conversations with its government.  He told his audience 
that the Millennium Project was "ready to work with Djibouti ." 
 
11. (SBU)   Comment:  Ambassador was able to pull Sachs aside just 
after his speech, and just before his meeting with President Guelleh, 
to give a quick brief on the U.S. development program in Djibouti 
(focused primarily on health, education and food security).  Sachs 
asked if there were significant U.S. involvement in and support of the 
Doraleh port project.  Ambassador told him that the U.S. Navy will be a 
principal customer for Doraleh services when the port comes on line in 
August, having leased several tanks for storage of fuel for naval 
vessels.  Although the Ambassador requested that Sachs arrange a 
meeting with her to discuss our Djibouti assistance program more fully, 
the intensity of his U.N.-sponsored Djibouti program did not permit 
this to occur.  End comment.