INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R001903650001-0
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 20, 2016
• Document Release Date: December 18, 2007
• Sequence Number: 1
• Publication Date: December 14, 1983
• Content Type: MEMO

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THE WHITE HOUSE
WASHINGTON
Date:
Executive F^gistry
CABINET AFFAIRS STAFFING MEMORANDUM
December 19, 198Number: 175146CA Due By: 3 pm, Friday
December 23
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Subject: DECISION MEMO: Internat
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Attorney General
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy,
Education
Counsellor
OMB
"CIA
UN
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Action
^
GSA
EPA
OPM
VA
SBA
the year.
CCCT/Gunn ^ ^
CCEA/Porter ^ ^
CCFA/ ^ ^
CCHR/Simmons ^ ^
CCLP/Uhlmann ^ ^
CCMA/Bledsoe ^ ^
CCNRE/ ^ ^
0
^
0
^
FYI
0
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0
0
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Please provide any comments you may have on the attached
recommendation by 5 pm, Friday,.December 23. It will be
scheduled for review with the President after the lst'Of
RETURN TO:
VCraig L. Fuller
Action FYI
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CEQ' ^ ^
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Baker
Deaver
Darman (For WH Staffing)
Jenkins
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Assistant to the President
for Cabinet Affairs
456-2823
^ Katherine Anderson ^ Don Clarey
^ Tom Gibson ^ Larry Herbols3
Associate Director
Office of Cabinet Affairs
456-2800
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R
ON OEC 14 Ell (}. 37 THE WHITE HOUSE
December 14, 1983
FROM: JOHN R. BLOCK, CR'MA PRO TEMPORE,
THE CABINET COUNCIL ON FOOD AND AGRICULTURE
Issues
International Fund for Agricultural Development
This memorandum requests your decision on two issues relating to
the International Fund for Agricultural Development (IFAD) which
the Cabinet Council on Food and Agriculture has recently
discussed. The two issues are:
o What is the appropriate level of the U.S. FY 1985
contribution to IFAD?
o Should the U.S. participate in the negotiation of a
second replenishment of IFAD?
The first issue needs to be resolved for your FY 1985 budget.
The last issue needs to be resolved before February when
negotiation of a second replenishment of IFAD is scheduled to
resume.
Background
The International Fund for Agricultural Development (IFAD) is an
outgrowth of the 1974 World Food Conference. It was established
in December 1977 to mobilize additional resources to be made
available on concessional terms for agricultural development.
Under the agreement establishing IFAD, industrialized countries
(Category I) and petroleum-exporting countries (Cateogry II)
contribute resources for projects in developing countries
(Category III) that address the needs of small farmers and the
rural poor.
IFAD's initial funding for 1978-1980 amounted to $1 billion, $200
million of which was contributed by the U.S. IFAD has a staff of
approximately 165, half professional and half support. Most of
IFAD's projects are cofinanced by existing multilateral
institutions, such as the World Bank and the regional development
banks. However, IFAD also cooperates with national
organizations, including development-oriented agencies like the
U.S. Agency for International Development (AID).
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Issue 1: Level of U.S. FY 1985 Contribution to IFAD
The Cabinet Council agreed to recommend that the Administration
fulfill its commitment to complete the first replenishment by
contributing the remaining $90 million owed to IFAD. The Council
disagreed on how rapidly the U.S. should complete this contri-
bution. Some felt there was no reason to accelerate our current
payment schedule of $50 million in FY 1985 and $40 million in FY
1986. Others felt this schedule could precipitate other nations
slowing down their contributions with the U.S. bearing the burden
of criticism that we were undermining the Fund.
The first replenishment of IFAD was negotiated to provide funds
for three calendar years, 1981-1983. The pledged U.S. share was
$180 million (17 percent of the total pledges). By December 31,
1983, the end of the period covered by the first replenishment,
the U.S. will have contributed $90 million. The current plan for
fulfilling the outstanding U.S. IFAD obligation calls for a $50
million budget request in FY 1985 and a $40 million budget
request in FY 1986.
Except for Iran and Libya, other donors already have contributed
roughly two-thirds of their pledges and are prepared to complete
their contributions in late 1983 or early 1984.
As a matter of policy, the Administration has attempted to meet
its obligations to all multilateral development banks (MDBs).
The IFAD pledge is an obligation incurred by this Administration.
You have indicated in writing that the U.S.. plans to provide the
balance of the U.S. contribution to IFAD before the end of 1983
(see attached letter to President Zia).
Four major Category I donors (United Kingdom, West Germany,
France, Canada and Japan) recently informed the U.S. that they
would draw out their first replenishment contributions, if the
U.S. refused to accelerate payment of its pledge.
Options
The Council considered four options.
Option 1: Maximum Acceleration of Payment Schedule.
Request $40 million in FY 1984 Supplemental"and $50
million in FY 1985 budget.
Advantages:
o Comes as close as presently possible to complying with
this Administration's financial commitment to IFAD.
o Would not interfere with the pending State-AID budget
request for FY 1985.
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o Would have an advantageous effect on the economic-
military_ assistance ratio in the FY 1984 Supplemental.
o Would avoid demise of IFAD that could result from a slow-
down of major donors' first replenishment contributions.
Disadvantages:
o Could prematurely signal U.S. support for a second
replenishment of IFAD (unless accompanied by appropriate
caveats).
o Could necessitate reductions for other higher priority
multilateral and bilateral foreign assistance programs.
o Could set a precedent for accelerating payment of U.S.
pledges to other multilateral development institutions.
Option 2: Accelerate Payment Schedule to Complete Commitment in
FY 1985.
Request $90 million in FY 1985 budget.
o Next best option for complying with the Administration's
financial commitment to IFAD.
o Would avoid demise of IFAD that could result from a
slowdown of major donors' contributions.
Disadvantages:
o Same disadvantages of Option 1 plus has negative budget
impact in that it requires an increase over the FY 1984
budget and the pending State-AID FY.1985 budget request
for IFAD.
Option 3: Accelerate Somewhat the FY 1985 Payment_Schedule.
Request $70 million in FY 1985 budget and $20 million
in FY 1986 budget.
o Might be enough to demonstrate U.S. good faith efforts to
I
meet its commitments.
o OECD nations probably would not withhold funding with
this increased show of U.S. support.
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Disadvantages:
o Combines most of the disadvantages of Options 1, 2 and 4.
Option 4: Maintain Current Payment Schedule.
Request $50 million in FY 1985 budget and $40 million
in FY 1986 budget.
Advantages:
o No budget increase over FY 1984.
o Requires no increase over pending State-AID FY 1985
budget request for IFAD.
o Avoids U.S. action that is inconsistent with its behavior
towards other multilateral and bilateral international
assistance programs.
Disadvantages:
o Constitutes a signal that the U.S. has a low regard for
IFAD and is not prepared to honor its commitment.
o Could prematurely signal U.S. opposition to a second
replenishment of IFAD (unless accogipanied by appropriate
caveats).
o Would seriously damage IFAD if OECD nations withhold
final contribution.
o Leaves U.S. paired with Iran and Libya.
Issue 2: U.S. Participation in Negotiation of a Second
Replenishment of IFAD
The Cabinet Council agreed to recommend that the U.S. indicate a
willingness to discuss a second replenishment of IFAD with the
following two stipulations:
0 The OPEC countries maintain their current 43 percent
share of IFAD contributions.
o The U.S. share not increase above the current 17 percent
level.
This approach would shift the focus of attention in the IFAD
discussions from how rapidly the U.S. will fulfill its
outstanding contributions, and whether we will agree to a second
replenishment, to the OPEC desire to reduce their share of IFAD
contributions. Should the second replenishment discussions prove'
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inconclusive, the U.S. would not be seen as responsible for a
failure to reach an agreement under this strategy.
Arguments For Participation in Second Replenishment
1. IFAD places emphasis on small farmer and rural poor.. IFAD is
the only multilateral institution which is focused entirely on
small farmers and landless poor. Successful projects can make a
major impact in raising nations to agricultural self-reliance.
As a specialized agency, IFAD can develop the depth of experience
needed to design effective targeted projects and innovations.
U.S. support of IFAD is a clear international illustration of our
support for the agricultural sector.
2. IFAD provides for a partnership between OECD and OPEC
countries. The governance of IFAD emphasizes partnership between
OECD and OPEC. This serves an important diplomatic purpose by
creating a forum for cooperation among the Arab and industrial-
ized states.
3. IFAD leverages_U.S. dollars. The U.S. contribution share to
MDBs is generally 25 percent. In IFAD, the current U.S. share is
17 percent. As a result, the U.S. contribution gets more project
dollars into the field than any other use. IFAD mobilizes more
petro dollars for development per U.S. dollar invested than any
other development institution. It is unlikely that OPEC states
would divert their IFAD contributions to other international
assistance programs, should IFAD's funding be reduced or
eliminated.
4. IFAD is an efficient, low-overhead operation. IFAD operates
with a limited number of staff. By design, it is a "fund", not a
"bank", and is structurally prohibited from being involved in
project implementation. Thus, administration of projects are
undertaken by other institutions which cofinance IFAD projects.
A recent study by Elmer Staats, former Comptroller General of the
U.S., concluded that IFAD's staff was actually too small.
5. There are signs of growing support for IFAD in Congress.
Senator Hatfield recently pledged his cooperation in securing
appropriations necessary to keep IFAD a viable institution.
Arguments Against Participation in Second Replenishment
1. IFAD duplicates the programs of AID and MDBs. Bilateral and
multilateral foreign assistance programs are already heavily
oriented toward agriculture. Approximately half of U.S.
development assistance goes into the agricultural sector. Most of
these funds are spent on research and large infrastructure
projects, rather than on projects with direct application to the
rural poor. The results of these research and large scale
projects may be more beneficial in the long run than small scale
rural development projects.
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2. IFAD has accomplished its mission. To the extent that IFAD
was formed because of a lack of donor attention to the problems
of the rural poor, it has accomplished its mission. Various
industrialized countries and multilateral institutions are now
placing increased emphasis on assisting the rural poor.
3. The U.S. lacks control over IFAD. IFAD loans are being made
to countries such as Cuba, Nicaragua and Guyana. The U.S. does
not have a blocking vote over country loans nor has it been
successful in influencing IFAD's lending policy.
4. IFAD is one more drain on the Treasury. The U.S. could save
a significant amount of money by dropping out of IFAD.
Alternatively, the U.S. could supplement its bilateral assistance
programs with funds that heretofore have gone to IF.AD.
5. Long-standing congressional concerns about IFAD will be
revived. Congress has been critical of IFAD in the past and has
delayed funding due to concerns related to: the perception of a
rapidly expanding IFAD staff; IFAD's loans to countries that are
objectionable to the U.S.; and the lack of equity between OECD
and OPEC donors in their contributions to IFAD.
Options
The Council considered two options.
Option 1: Participate in the negotiation of a second
replenishment of IFAD with an understanding that the
U.S. contribution to the second replenishment will be
subject to strict predetermined conditions.
Option 2: Refuse to participate in the negotiation of a second
replenishment of IFAD.
Decision
Issue 1: What is the appropriate level of the U.S. FY 1985
contribution to IFAD?
Option 1 Maximum Acceleration of Payment
Schedule.
Request $40 million in FY 1984
Supplemental and $50 million in FY 1985
budget.
Option 2 Accelerate Payment Schedule to Complete
Commitment in FY 1985.
Request $90 million in FY 1985 budget.
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Option 3 Accelerate Somewhat FY 1985 Payment
Schedule,.
Request $70 million in FY 1985 budget
and $20 million in FY.1986 budget.
Supported by: Agriculture.
Option 4 Maintain Current Payment Schedule.
Request $50 million in FY 19.85 budget
and $40 million in FY 1986 budget.
Supported by: State, Treasury and OMB.
Note: AID would like to do something to indicate U.S.
interest in: IFAD but has not recommended a
specific proposal.
Issue 2:, Should the U.S. participate in the negotiation of.a
second replenishment. of IFAD?
Option 1 Participate in the negotiation of a second
replenishment of IFAD with an understanding
that the U.S. contribution to the second
replenishment would be subject to strict
predetermined conditions.
Option 2 Refuse-to participate in the negotiation of
a second replenishment of IFAD.
Recommendation: The Cabinet Council on Food and
Agriculture unanimously recommends Option 1; specifying
that'U.S. participation in a second replenishment of
IFAD be subject to the following conditions:
o The OPEC countries maintain their current 43
percent share of IFAD contributions.
The U.S..share not increase above the current 17
percent level.
Approve Disapprove
If. you approve this general approach, the Council will
refine the other elements of the U.S. negotiating
position on a second replenishment for your
consideration.
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THE WHITE HOUSE
WASHINGTON
Thank you for your letter of March 27 expressing your
concern over the replenishment for the International
Fund for Agricultural Development _(IFAD).
The United States has been a firm supporter of IFAD from
its inception and my Administration will continue to
support it. At present we are seeking funds from Congress
for its first replenishment. As you know, we have succeeded
in obtaining Congressional authorization for the full U.S.
contribution of $180 million. We were unable to secure an
appropriation in our fiscal year 1982 legislation, owing in
large measure to the delay in reaching the replenishment
agreement and because of Congressional dissatisfaction with
the expansion of the Fund's permanent staff. Now that an
agreement has been concluded and a,freeze adopted on the
staffing issue, wehave-a much stronger case to present in
support of the necessary appropriation.
We have included $65.4 million for IFAD in our budget for
fiscal year 1983 commencing October 1, 1982, and plan to
provide the balance of the total U.S. contribution before
the end of calendar year 1983. With the process of.
Congressional hearings and consideration-of the fiscal year
1983 request now underway, we have no plans to seek IFAD
funding through the alternative course of a special supple-
mental budget request. However, as the normal legislative
process develops over the next several months, we will, if
it becomes necessary to do so, examine carefully the
feasibility of a supplemental request for IFAD.
With warm personal regards,
Sincerely, Q
His Excellency `
General Mohammad Zia-ul-Haq
President of the Islamic Republic
of Pakistan
Islamabad
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