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Viewing cable 08LONDON2784, FINANCIAL CRISIS AND UK DEVELOPMENT PRIORITIES

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Reference ID Created Released Classification Origin
08LONDON2784 2008-11-03 17:04 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy London
VZCZCXRO1947
RR RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHLO #2784/01 3081704
ZNR UUUUU ZZH
R 031704Z NOV 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 0312
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHMO/AMEMBASSY MOSCOW 2745
RUEHOT/AMEMBASSY OTTAWA 1186
RUEHKO/AMEMBASSY TOKYO 1185
RUCNDT/USMISSION USUN NEW YORK 1300
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
UNCLAS SECTION 01 OF 02 LONDON 002784 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON EFIN UK
SUBJECT: FINANCIAL CRISIS AND UK DEVELOPMENT PRIORITIES 
 
1. (U) Summary: Despite the economic crisis, HMG has no 
intention of cutting back on assistance and indeed, will move 
forward to increase funding, UK Development Secretary Douglas 
Alexander told Parliament on October 30. In response to a 
parliamentary inquiry, Alexander stated that he plans to push 
donors to fulfill their development pledges at the November 
29 - December 2 Doha Financing for Development meeting and 
that he strongly supports the establishment of a Global 
Partnership to address food security issues. Expressing 
concern about the effects of the global crisis on developing 
countries, he called for the November 15 G-20 Finance Summit 
to also consider their needs.  End Summary. 
 
Holding Donors to Account 
------------------------- 
 
2. (U) HMG plans to make certain that donors deliver on the 
$16 billion in new pledges made at the UN's MDG event in 
September, Development Secretary Douglas Alexander told 
Parliament's International Development Committee (IDC) on 
October 30.  Alexander noted that countries' failure to 
fulfill their commitments will be obvious, since many pledges 
were specific and could be measured.  Such pledges also 
included assistance from non-traditional donors, such as the 
$500 million from Saudi Arabia for education and $30 million 
from China for malaria. 
 
3. (U) Skeptical IDC members stressed that pledges were not 
the same as delivering assistance and asked how would the 
Department for International Development (DFID) ensure the 
pledges are met when spending priorities are being shifted as 
a result of the global financial crisis.  Alexander responded 
that during the September 2-4 Accra aid effectiveness 
meeting, the British Government, along with the European 
Commission, pushed for the U.S. and Japan to not only fulfill 
their pledges but to do more.  He also said that at the 
Financing for Development (FfD) meeting November 29- December 
2, he would press donors to reaffirm their commitments to 
development assistance. 
 
4. (U) The UK is also pressing EU members to "concretize" the 
0.56 percent of GDP by 2010 target into specific, measurable 
country allocations.  To avoid HMG becoming the "financier of 
last resort," DFID is stressing the themes of "shared 
interest" and the "benign influence" of development as 
arguments for other donors to provide assistance. 
 
5. (U) Regarding the commitments businesses made to support 
the MDGs as part of the Business Call to Action held in May 
and as part of the UN's MDG meeting in September, Alexander 
said he has received no indication from any of the 27 
companies that they would reduce their pledges as a result of 
the financial crisis. 
 
UK Spending on Aid will Increase 
-------------------------------- 
 
6. (U) Despite the UK's economic problems, DFID's planned 
real annual increase of 11 percent remains intact, and the UK 
will meet its assistance goal of 0.7 percent to GDP by 2013, 
as planned, said Alexander.  Given the financial turmoil, 
DFID understands that domestic support for development 
assistance could wane; spending across-the-board will be 
scrutinized by voters, stated Alexander.  DFID will conduct 
outreach, focusing on the message that development spending 
is an investment in a shared future that benefits recipient 
countries and the UK public, as well. 
 
Financial Crisis Will Hit Developing Countries Hard 
--------------------------------------------- ------ 
 
7. (U) As a result of the global economic crisis, DFID 
expects capital inflows to Africa to drop by 50 percent to 
$25 billion a year, remittances to fall, and current average 
real GDP growth of 6.5 percent to slow to 4.5 percent.  DFID 
is developing a matrix of the countries most vulnerable, 
Alexander said, but has not concluded the study. 
 
8. (U) Alexander said the main challenge is to ensure the 
voice of poorer countries is considered when developing a 
global response to the financial crisis.  He welcomed the 
inclusion of the G-20 at the November 15 Economic Summit in 
Washington, and called for that meeting to identify 
developing country needs.  He added that DFID is actively 
feeding into the UK position for the Summit. 
 
LONDON 00002784  002 OF 002 
 
 
 
9. (U) Alexander also said he has spoken with the World Bank 
about filling in expected funding gaps, as a result of the 
crisis. DFID supports the International Finance Corporation's 
plan to help recapitalize banks. He also called on the World 
Bank to draw from existing reserves to double its current 
lending to $27 billion to mitigate the impact of the 
financial crisis in developing countries, and praised Robert 
Zoellick's leadership at the World Bank. 
 
Food Security 
------------- 
 
10. (U) Alexander praised the World Bank and World Food 
Program for responding quickly to the rise in food prices. 
Although prices for wheat, maize, and rice have fallen from 
their peak, they remain far higher than they were two years 
ago.  Alexander highlighted new announcements of GBP 70 
million for child livelihood programs in Bangladesh and GBP 
42 million for food assistance in the Horn of Africa and 
noted that DFID has identified 30 priority countries to 
receive assistance with seed and fertilizer. 
 
11. (U) Alexander also stated that he strongly supported the 
establishment of a Global Partnership on Agriculture and Food 
(GPAF), as G-8 members pledged at the Toyako Summit in July. 
He envisioned GPAF would include a broad range of partners, 
hold parties to account for delivering on commitments, use 
existing mechanisms for financing, support national regional 
plans (such as the Comprehensive African Agricultural 
Development Program - CAADP), and utilize the UN 
Comprehensive Framework for Action. 
 
12. (SBU) Biographic Note: On several occasions Alexander 
drew examples from U.S. politicians to make his point.  He 
highlighted former President Clinton's response to the 
question of why the Clinton Global Initiative should continue 
to provide funding during the financial crisis (U.S. 
popularity rising in southern Africa and the potential to use 
country-level positives to debunk the myth that "Africa" 
implies failed states).  He also strongly praised PM Brown, 
crediting him with the UK's development successes.  He said, 
"It is hard to overstate the credibility he (Brown) brings to 
efforts to get others to do their share." 
 
Visit London's Classified Website: 
http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom 
 
TUTTLE