April 16, 2000


Dr. Nicolas Legran
Minister, Ministry of the Foreign Affairs
Suite 407
Government Administration Building
Fontaine
Arcadia


SUBJECT: To inform the result of the negotiation at the meeting with A.I.D


Dear Mr. Legran:

I was glad to hear from you the other day that Arcadia's latest economical status showed a slowed downward trend. And I was really grateful for your effort to keep me informed about Arcadia's current situations. The information you gave to me was used as precious material in managing my work. I'm sending this letter in response to your request to inform you the results of the meeting with A.I.D. I hope that you find that the following report meets your need.

Our negotiations focused on two questions: How much aid and in what form it would be given. We have found, from the beginning of the negotiation, that the amount A.I.D needed and what we wanted to give them were too different. There was almost $50 million difference. So we had to compromise quite a lot. But in my point of view, the amount and the form we have reached an agreement was quite a favorable condition because that will actually help Arcadia's economy and improve our government's image quite much at home and abroad.

Some background information on the negotiations will provide you a better understanding of how they have developed. A.I.D representatives came to negotiations with rather determined attitudes like they would make no concession in the meeting. And as we expected, before the meeting started, they kept on looking unsatisfied with our aid record, and especially after they compared our aid record with the other countries', they even complained about the big difference in the amount of aid in their conversations, with quite a loud voice. In our preliminary meetings, our position was also concrete that we couldn't provide more than $60 million: $40 million in cash and $20 million in products. And we planned to convince them that we didn't have any choice but to give only this amount of aid because we suffered from deteriorating economy. However we realized that if we really wanted to improve Arcadia's negative image in the world community, we had to provide a little more aid than we initially planned even though its form is not cash. After serious discussions, what we eventually decided was providing our unemployed human resources that would cost $10 million, like doctors, trainers of agriculture, etc. We thought that this was a good idea in that it would help us to solve our unemployment problems partially, and at the same time, to improve our government's image. In summary, in our last preliminary meeting, we concluded that we would suggest A.I.D that Arcadia hoped that our next year's donation would be $40 million in cash, $20 million in products and $10 million worth of human resources.

However, as we expected, to negotiate with A.I.D on our proposal wasn't easy. Initially, they required us to donate $120 cash considering other European countries' trend to increase the amount of aid. The gap between the each other's wanted amount was so wide that we Arcadia representatives decided to increase the amount but to request A.I.D that the form should be products, not cash. After series of discussions, we reached an agreement that we would provide them $90 million in products and $15 million worth of human resources (The number of people we are going to send to the poor countries will be 750, because the cost for one person per year is around $20,000). In addition to that we gave them the right to choose items of products and human resources. The items they chose and the plan for carrying the aid are as follows.

In addition to that, we reached an agreement that we would adopt the F.O.B (free on board) service for paying the transporting cost. And the cost for supervising the transportation and checking the products will be paid by A.I.D. However, if over 5% of the carried products are damaged during transportation, Arcardia will compensate for 70% of the damaged products.

Our assessment of the negotiations is rather positive. Even though we had to raise the amount of aid quite much comparing to our initial plan, the agreement that the whole aid will be given in the form of products and human resources is quite favorable to us. By providing aid in those forms, we can stimulate our economy. According to the examination by the Office of the Economic Planning, if we provide aid in those forms, we can decrease our current 13% unemployment rate to 8% and government can get 5% value added tax from the $95 million worth of products. In addition to that, Acardias's image in the world community can be improved quite a lot, because we actually increase the amount of aid to $45 million compare to last year. And especially, if our human resources work well in the poor countries, that can be directly related to our country's good image.

Our team recommends that Arcadia government faithfully follow the agreements we have reached on the meeting. In addition to that, we hope Arcadia government voluntarily watches the process that the A.I.D distributes and uses our donation. We believe that there must be some parts that we can give them some advises for better use of the donation. Probably that can be our another form of donation to poor countries' people.

In conclusion, then, we feel that the agreement we have reached goes some way toward giving positive stimukus to Arcadia's economy, at the same time, improving our negative image in the world community.

As always, we appreciate your concern and help. We would appreciate it even more if you give us more suggestions. And if you need more information about the negotiation, please ask me without hesitation. I'll stay at this hotel until the end of this month, so you can contact me at the number I gave you the other day.

Sincerely yours,

Han Su-yeon
Member,
Arcadia resentatives of the Foreign Aid