US embassy cable - 03ROME3607

UNCLAS  ROME 003607 
 
SIPDIS 
 
 
AIDAC 
 
FROM U.S. MISSION IN ROME 
 
SENSITIVE 
 
STATE FOR A/S PRM DEWEY, IO A/S HOLMES, EUR/NE, EUR/WE, 
SA/INS, IO/EDA SKOTOK 
USDA/FAS FOR U/S PENN, MCHAMBLISS, RTILSWORTH AND LPANASUK 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE, 
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS 
BRUSSELS FOR USAID/PLERNER 
USUN FOR MLUTZ 
GENEVA FOR RMA/LYNCH AND USAID/KYLOH 
NSC FOR JDWORKEN 
 
E.O.  12958:  N/A 
TAGS: EAID, EAGR, AORC, PREF, KUNR, WFP, UN 
SUBJECT:  Policy dialogue session in Dhaka on WFP post- 
delivery losses in Bangladesh 
 
REF: (A) 02 ROME 02673 
 
SENSITIVE BUT UNCLASSIFIED - PLEASE PROTECT ACCORDINGLY. 
NOT SUITABLE FOR INTERNET POSTING. 
 
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SUMMARY 
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1. (U) The International Food Policy Research Institute 
(IFPRI) led a July 24 policy dialogue session in Dhaka to 
review key findings and preliminary recommendations of its 
WFP commissioned Food Aid Leakages study. Sub-studies on 
losses linked to discharge in ports, transit losses through 
the national Public Food Distribution System (PFDS) to the 
district level, and from Local Supply Depots (LSD) to the 
beneficiary - were presented. While loss rates were 
acknowledged to be unacceptably high, GOB affirmed its 
decision to vigorously pursue the study's recommendations 
through adoption of a plan of action. End summary. 
 
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Background 
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2. (U) In May 2001, the WFP Rome Secretariat informed the 
Executive Board of the commencement of a sustained effort in 
Bangladesh with bilateral and multilateral food aid donors 
(U.S., Canada, others) to address the problem of suspected 
food leakage to non-targeted beneficiaries or elsewhere 
through GOB-controlled distribution channels. WFP's initial 
misgivings came from a 1997 request it made to IFPRI to 
carry out a preliminary study to investigate the magnitude 
of the problem of food aid leakages in WFP-sponsored 
activities and develop a monitoring methodology capable of 
controlling in-country losses. In 1998, a comprehensive food 
commodity tracking system appraisal was carried out. In 
1999, the WFP country office established a food transport 
and storage-monitoring unit. Since then, efforts have been 
made to inform vulnerable group and emergency operation 
beneficiaries, as well as the public at large, of their 
rights and entitlements related to rations. 
In recent years WFP has also proceeded to open a number of 
sub-offices throughout Bangladesh. 
 
3. (U) The latest (and most ambitious) IFPRI study began in 
October 2002 and fieldwork was concluded by March 2003. A 
first draft of the findings was issued. With the caveat that 
donors and the WFP leadership were convinced that this 
process could not be rushed in order to assure complete GOB 
ownership of the results, a final report dialogue session 
was held in Dhaka on July 24, chaired by Dr. Quazi 
Mesbahuddin Ahmed, Additional Secretary, Economic Relations 
Division, Ministry of Foreign Affairs, and amply attended by 
numerous responsible counterpart Ministries. US Mission/Rome 
Humanitarian Attache Tim Lavelle and Program Analyst Phil 
Lamade attended this session. 
 
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Major findings 
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4. (SBU) Port losses for WFP imports are adjudged by IFPRI 
to be 1.55 percent of listed Bill of Lading Quantities. 
Transit losses in the Public Distribution System (which 
moves the commodities from the port to the district level 
through the Ministry of Food) were calculated at 0.72 
percent. Most worrying are losses from the local supply 
depots (LSD) of the Ministry of Food through the finalS PENN, MCHAMBLISS, 
RTILSWORTH AND LPANASUK 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE, 
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS 
BRUSSELS FOR USAID/PLERNER 
USUN FOR MLUTZ 
GENEVA FOR RMA/LYNCH AND USAID/KYLOH 
NSC FOR JD 
 
 
delivery to beneficiaries, which are calculated at 8 percent 
for WFP's major effort in Bangladesh, the Vulnerable Group 
Development (VGD) scheme. Part of these local losses are 
attributed to the pressure to feed additional "ultra poor" 
or destitute who are not officially listed beneficiaries 
(i.e., dilution of rations); use of some of the food to pay 
expenses related to handling and local transport; and 
deliberate underweighing of rations at distribution sites by 
local authorities. Note: WFP's VGD activity covers 500,000 
vulnerable women on an annual basis. Bangladesh's "ultra 
poor" are calculated at 30 million and the number of 
chronically undernourished around 45-50 million, so that 
there is constant "pressure" to feed more vulnerable people 
than are listed on official coverage rolls. End note. 
 
5. (U) In practice, GOB has been absorbing the port and in- 
transit losses and crediting WFP with the Bill of Lading 
quantities at the LSD level. Even so, port and in- 
transit/storage losses up to the local level still 
constitute a loss to the national wealth and failure to 
seriously consider recurring shortfalls hardly provides any 
concerted incentive to ratchet down these losses to 
acceptable levels. 
 
6. (U) At the end of the working session on July 24, it was 
agreed by IFPRI and the concerned parties that the finalized 
report and recommendations, in addition to a specific plan 
of action with timetables - would be made available by mid- 
September. 
 
7. (SBU) On specific losses by category, the following: 
 
-Ports: operational losses due to normal handling and 
spillage is estimated to be 0.05 percent and the loss due to 
pilferage and other forms of misuse is estimated at 1.50 
percent. Losses due to pilferage appear to be associated 
with the involvement of numerous agents and agencies in food 
aid imports which makes assigning of direct responsibility 
difficult (i.e., "too many cooks"); the absence of 
appropriate legal mechanisms to provide financial incentives 
to stevedores and other parties engaged in discharge; the 
presence of "tainted" unions in the principal ports; and 
collusion; 
 
-Public Food Distribution System (PFDS): As per IFPRI, in- 
transit and storage losses in the PFDS have substantially 
declined in the 1990s. Transit loss of food grains, which 
was as high as 3.5 percent of total distribution during the 
1980s - declined to 0.30 percent between 1998 and 2002, 
while storage losses were reduced from 1.5 percent to 0.72 
percent. Despite progress, IFPRI sees room for further 
improvements. In particular, an analysis of stock rotation 
suggests that 35 percent of the food grain distributed to 
beneficiaries is more than nine months old; 
 
-LSD to final beneficiary: District level Union Parishad 
(UP) chairpersons and members who distribute food grain to 
beneficiaries report lengthy delays or non-receipt of 
transport or handling commissions. Further, the approved 
rates are generally not sufficient to cover all the costs 
involved. Moreover, an absence of standardized and reliable 
weighing techniques makes monitoring of correct rations 
amounts difficult. IFPRI (through independent weighing of a 
random sample size of beneficiaries) determined that under 
delivery to the beneficiary averaged 7.53 percent and 
discrepancies in beneficiary lists accounted for a further 
0.48 percent loss, bringing the total leakage level in the 
VGD program at the local level to 8.01 percent.S FOR U/S PENN, MCHAMBLISS, 
RTILSWORTH AND LPANASUK 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE, 
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS 
BRUSSELS FOR USAID/PLERNER 
USUN FOR MLUTZ 
GENEVA FOR RMA/LYNCH AND USAID/KYLOH 
NS 
 
 
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Major Recommendations 
--------------------- 
 
8. (SBU) The quantity recorded in a Bill of Lading should be 
considered the reference quantity for agreements between the 
GOB and donors on the amount of food grains delivered; 
 
-The number of independent surveyors/agents involved in food 
aid imports should be reduced and the process further 
streamlined. Preferably, all tallies should be performed by 
independent surveyors; 
 
-Preference should be given to the port of Chittagong which 
is more effectively managed than is Mongla port; 
 
-A comprehensive data base should be developed by WFP, 
Ministry of Food, shipping and lightering agents. This would 
produce a common information set, available to all parties 
without time lags; 
 
-GOB should expedite payment of incentives to stevedores and 
others engaged in the discharge process; 
 
-In the PFDS system, transporters should assume full 
responsibility for delivery of full invoiced quantities; 
 
-International food aid arrivals should be scheduled so that 
they do not coincide with the GOB's procurement season; 
 
-The GOB and the donors should formulate a single cost 
sharing arrangement to cover internal transport, shipping 
and handling (ITSH) costs; 
 
-Transportation and handling costs from the LSD to 
distribution center should be assessed for each Union and 
necessary allowances allocated in advance; 
 
-Weighing of rations at distribution sites should be 
performed using standard volume weighing measure; 
 
-As involuntary sharing of food rations violates program 
rules, steps should be taken to enforce a ban on this 
process; 
 
-The GOB and WFP should monitor program activity regularly 
to observe whether unauthorized activities exist, and take 
corrective measures, including strict disciplinary actions, 
whenever such activities are detected. 
 
9. (SBU) Note. IFPRI also propounded: a) downsizing of the 
GOB's national security stock reserve from 800,000 metric 
tons (mts) to 600,000 mts, now that the private market plays 
a more important role in price stabilization; and b) PFDS 
auctioning off donations of red wheat (which commands a 
higher price on the local market), and delivering only white 
wheat varieties to WFP beneficiaries, which IFPRI maintains 
that the poor prefer. These are complex recommendations 
which will probably require further analysis. End note. 
 
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Comment 
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10. (SBU) WFP has a USD 67 million/annum program in 
Bangladesh. To combat leakages, they have moved away in part 
from whole grain distribution through promotion of atta FOR A/S PRM DEWEY, 
IO A/S HOLMES, EUR/NE, EUR/WE, 
SA/INS, IO/EDA SKOTOK 
USDA/FAS FOR U/S PENN, MCHAMBLISS, RTILSWORTH AND LPANASUK 
USAID FOR ADMINISTRATOR NATSIOS, AA/DCHA WINTER, AA/ANE, 
D/DCHA/OFDA BMCCONNELL, D/DCHA/FFP LANDIS 
BRU 
 
 
(flour) fortification mills (which produce a readily 
identifiable product) in a number of rural areas, with 
support from USAID and CIDA; WFP has also launched a 
national primary school feeding project using enriched 
biscuits which contain the WFP-logo. Yet more needs to be 
done to ensure that beneficiaries do indeed obtain their 
agreed upon rations. While WFP is to be given due credit for 
identifying the problem, given the sizable amounts of 
commodity leakage involved, WFP, the GOB and the principal 
donors now need to fix what has been well documented (by the 
highly-respected IFPRI) to be broken. Every case of 
commodity hemorrhaging in today's constrained budgetary 
environment has to be swiftly and vigorously addressed. 
Bangladesh cannot be the exception to this rule. Hall 
 
 
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	2003ROME03607 - Classification: UNCLASSIFIED