April 16, 2000

Mrs. Isabelle Leblanc
Secretary General, The Africa in Distress Organization
Suite 1205
The AID Organization Building
La 27e Ave., Ville de Paix
Arcadia

SUBJECT: Interim report; Negotiations for Aid from Arcadia to Africa in 2001

Dear Mrs. Leblanc,

It was a great honor for me to work with you in one team for the latest meeting with France. It was a good lesson to me, and it's also helpful to me even now. As you requested, I'm writing to inform you of how negotiations with the Arcadia government are going, and I hope that, with this report, it is easy to understand the current status of negotiations.

We've discussed on aid, focusing on two central points; how much aid and in what form it would be given. During the two times of negotiations, it was very hard to reach an agreement because both teams were adhering to their own positions as we had anticipated. We had to compromise quite a lot and have come to some arrangements that would be helpful both for Arcadia and Africa.

I'd like to offer you some background information for your better understanding on how negotiations have developed. As you know, the present government of Arcadia cut down their aid to only $60 million in this year. This is a minimum figure and one which contrasts sharply with the increased aid being pledged by other nations. In order to be a bit more specific, I enclose data on the existing state of aid by some European countries, which would give you more concrete idea about how Arcadia has been the notable exception.

Another background information I consider helpful is about our preliminary meetings: our team planned to get Arcadia to pledge $120 million in the form of non-tied aid. At that time, we thought Arcadia would accept our proposal to a degree and increase the amount as a way of improving its damaged image at home and abroad, but we could also expect its strong objection because we knew Arcadia's bad economic situation. We were, accordingly, ready to accept reducing down to at least $100 million in the form that includes at least 50% non-tied aid. For more specific ideas, I'd like you to refer the other enclosure, our team's position paper on Arcadia's aid to Africa.

Negotiations have developed into an agreement, whose process was more complex than we had expected. In the beginning, it seemed impossible to reach an agreement because there was a wide gap between the amount we suggested and the one Arcadia did. As regards the final agreement on the amount and the form, we managed to agree to $105 million in 100% tied form that is composed of $90 million worth of products, $15 million worth of human resources, and AID' s right to choose items. Also, I'd like to show you other details related to this decision with the following:

1. Items

* Arcadia will hire about 750 persons, who will stay and work in Africa for a year, with$15 million.

2. Conveyance

3. Related Points

• Products and human resources will be transported in two shipments, each half in each time.
• AID is responsible for the price of FOB, and its estimated cost is around $1 million.
• When the transport arrive at Navire, if there are damaged products in over 5% of the whole, Arcadia will compensate 70% of the damaged products at 15 days, and if it's below 5%, we will ignore it.

In addition to these details, in the next negotiation, we will discuss a couple of more details: whether AID helps Arcadia set up lodging for people Arcadia is supposed to send, and if we are willing to do so, how we will help them; how AID will inform Arcadia of the itemized statement of their aid; how AID will inform Arcadia of more detailed sub items of each items above. It's because we need to research on more specific items poor African really need now, it will take a couple of weeks to send accurate information to Arcadia; and so on.

Our assessment of the agreement we have negotiated is that, while we appear to have reached a mutually acceptable general agreement with Arcadia, before we complete Arcadia's aid program this time, there may be some difficulties in addition to many things not discussed yet as I mentioned above. It would be difficult for Arcadia government to get the Parliament's agreement. Also, AID needs to assure Arcadia that we will transmit aid goods to poor Africans directly. On the other hand, we succeeded in increasing Arcadia's aid amount from $60 million up to $105 million. Besides, the conclusion of our negotiations is very meaningful in that it will have influence on Arcadia's attitude towards aid later on.

We consider this agreement as the best we could get and Arcadia could promise to give, so our team recommend that AID go ahead positively with this aid program. After negotiations finish, consequently, there will be a lot of things AID is expected to do. I also suggest that you plan, and execute, if necessary, as follows:

• A meeting needs to be held for making a decision over which parts of Africa willbe given Arcadia's aid this time, and how relief goods and human resources will be transported from Casablanca.
• For the possible case that the transportation from Casablanca is not carried out on receipt of relief goods, AID will have to look for a warehouse around the port.
• It would make our work easier to inform Lloyd Surveyors, who has been our best business partner since 1982, of their new inspection work of this time.
• As I mentioned before, AID need to research on more specific items poor African really need in the presence. For example, we need to know what kind of agricultural equipments are in necessity.
• It will facilitate our work on this aid to ask a celebrity to write a letter to Arcadiawhich can persuade them to keep their promise very willingly.
• AID needs help from UN. We suggest that AID ask UN for some transportation expenses. We estimated it will cost around $2 million: $1 million for FOB and the rest for transportation from Casablanca to each place. And we need many volunteers from UN for distributing relief goods to poor Africans. These volunteers will not only ease ourwork but also convince people out of AID that aid is directly going to the poors. Also we propose that AID ask UN to research on the aid's influence on each country's economy.This is for convincing Arcadia government and Parliament that usually aid cannot haveany bad influence on one nation's economy, and this is also for Arcadia's aid later on.

In conclusion, the poor in Africa will be given aid of $105 million from Arcadia. Though our team regret that it's in the form of 100% tied aid, we think two negotiations, so far, were successful to a degree. Besides, when the last negotiation is concluded, Arcadia's aid this time would be absolutely helpful to both Arcadia and poor Africans, we believe.

As always, we are grateful for your concern and help. We would welcome any more suggestions any time, if you have. I will give you another report after all the details are fully discussed. And if you require further information, please contact me at the number of cell phone. I remember I gave it to you the other day. Well then, I'm hoping that we will meet again in the office.

Best regards,

Kim Jung Hyun
Member
AID Africa Development Board

KJH/yjm

Enclosures:

• Data on "The Existing State of Aid by the European Countries"
• Our team's Position Paper on Arcadia's Aid to Africa