April 17, 2000

Dr. Petry Saunafan
Minister, Ministry of Foreign Affairs
Suite 603
Government Administration Building
Arcady
Arcadia

Subject: Negotiations of aid with A.I.D.

Dear Dr. Saunafan:

It was good to see you at our dinner together last week, and I want to thank you for your helpful advice. At that dinner, you asked me to let you know right away about the negotiations; as you requested, I'm writing to inform you how negotiations with AID are progressing, and I hope you find that the following report meets your needs.

Our negotiations on aid with AID focused on two questions: how much aid and in what form it would be provided. After two negotiation sessions, we have found that AID is not about to accept what we originally intended to offer; we wanted to set the amount of aid at $60 million, and AID tried to increase the amount of aid as much as possible; so we had to compromise quite a lot. We, however, feel that the Assembly will find it in our interest to accept the agreement we have reached. (Let me explain this fully in Assessment of this letter.)

It will help your understanding if you know some background information leading up to the agreement we reached. In our preliminary meeting we initially planned to provide $40 million in cash and $20 million worth of goods donating our aid directly to AID, not to governments. And instead of giving fixed amount of aid, we would like to send our human resources to help the least developed countries. According to the report of Development Forum, foreign aid goes to govenments in general, not to the poor (You can be informed with the report enclosed.); so we thought that if we provided some part of aid as form of goods- the poor really need- directly to AID, our image would be better compared to other foreign aid which goes to government. Therefore, on the form of aid throughout the negotiations, we have preferred to provide goods rather than money; it will be also good for Arcadia because giving products will provide some stimulation to our economy.

Against that background negotiations developed into an agreement which was more complex than we had expected; we tried to fix the amount of aid, and on the other hand, AID required the aid to be increased. In the general meeting, we proposed that we would like to provide $40million in cash, $20 million worth of goods, and $10 million worth of human resources for services. AID, however, required $120 million in cash. As far as the amount of aid is concerned, while we have managed to get AID to accept less than $120 million they wanted, we had to agree to a higher figure than we had initially intended. However, we convinced them that so far as the form of aid is concerned, the donation of goods is much better for both AID and Arcadia than aid in cash; AID can get goods they need to support the poor and human resources; and Arcadia can stimulate our economy by product more goods. After quite a lot of compromising, AID made a concession to us on the form of aid, and we conceded somewhat the amount of aid. So we finally came to an agreement with AID; we had managed to agree to a package total amount of aid, $105 million; $90 million worth of goods from Arcadian factories and $15 million worth of human resources. And AID will be given the right to choose items of goods they need. We couldn't discuss details by the end of the session, so two leaders of both Arcadia and AID made details later. Please look at the details below.

(unit: $1,000,000)

shipment	Lasbana port in Arcadia
destination	Casablanca port in Moroco
the date of shipment	February 1, 2001	all the human resources, and half amount of products
	August 1, 2001	the other amount of products
inspector	Lloyd Surveyor
shipping cost	on FOB (=free on board) basis
quality of goods	If over 5% of the whole food goes bad, Arcadia compensates for 70% of the corrupt food.

Our assessment of the agreement we have negotiated is that the present status of negotiations is rather positive, though we couldn't achieve our initial objective of fixing the amount of aid. In addition to improving our image, providing our products can stimulate our economy. After the negotiations, we required Office of economic planning to calculate specific figures of outcome which providing goods might bring to. According to the report presented by Office of economic planning, to product several kinds of goods we will donate, a number of Arcadian factories will need lots of workers; and 750 unemployed persons will be deployed: then we can decrease unemployment rate from 13% to 8%. Also, many factories increase their production, Arcadian government will earn 5% more tax income. In other words, Arcadia will benefit by both decreasing unemployment rate and getting tax income from increased production; not only approximately $30 million worth of synergic effect through our economy in a year but also vast sums of profit in the long view, according to the report by office of economic planning.

Our team consider this agreement palatable to the National Assembly and recommend that you present in to them. We hope, however, that before presentation you go to the budget department to get some specific figures of the budget. It will be also helpful if you paid attention to the enclosed report which Office of economic planning sent us; there are some useful information such as how we can decrease unemployment rate and get more tax income from donating aid, and some statistics figures you can use for your presentation.

In conclusion, we have come to an agreement that Arcadia will donate $90 million worth of products and also provide a total of 750 workers, directly to AID. We feel that the agreement we have reached goes some way toward improving our negative image in the world community and, at the same time, stimulating our economy.

Everyone on the team is always grateful for your help and concern. We would appreciate more suggestions if you have any. And if you need further information or have any questions about our opinions, please contact me; I will stay at this hotel for the next week, at least until the 27th.

Very truly yours,

Cho Sung Hui

Member
Arcadian Foreign Aid committee

Enclosures:

1. report of Development Forum - The unending aid debate
2. report of the Office of economic planning