AMBASSADOR RETZER AND PRESIDENT KIKWETE DISCUSS

S E C R E T SECTION 01 OF 05 DAR ES SALAAM 000715

SIPDIS

SIPDIS

DEPT AF/E FOR B YODER, C PELT, AF/RSA FOR J NAY, C BECK
ALSO AF/EPS FOR M NORMAN, T HASTINGS
DEPT PASS TO MCC OFFICE FOR G BREVNOV, L BLACK
ALSO USTR FOR W JACKSON
LONDON, PARIS FOR AFRICA WATCHERS

E.O. 12958: DECL: 05/03/2016
TAGS: PGOV PREL PHUM ECON EAID MARR TZ
SUBJECT: AMBASSADOR RETZER AND PRESIDENT KIKWETE DISCUSS
MILITARY AND SECURITY ASSISTANCE, ENERGY SECTOR, AND
UPCOMING U.S. VISIT

REF: A. DAR ES SALAAM 0498

B. DAR ES SALAAM 0696

Classified By: Political Officer Mary B. Johnson for reasons 1.4(b,d)

Summary
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1. (C) President Kikwete emphasized to Ambassador Retzer
during an hour-long meeting in Dodoma that his administration
intends to be "proactive in developing our relationship with
the United States." Kikwete indicated he will use his
mid-May trip to Washington, Boston and New York to forge
stronger ties with the USG and the U.S. private sector in the
military, security, economic and investment arenas. He is
ready to announce an ACOTA agreement and sign the MCA
Threshold Agreement while in Washington. Kikwete recognized
that Tanzania needs stronger laws to halt human trafficking
and is interested in signing a Letter of Agreement with the
Department of Justice providing technical assistance in
drafting such legislation. Kikwete deplored growing East
African organized crime rings and Tanzania's porous land
borders and requested USG assistance to augment the capacity
of Tanzania's law enforcement units. President Kikwete also
shared the hurdles he faces in attempting to reform the
energy sector, including dealing with the state-run energy
company TANESCO's request to raise electricity tariffs by 25
percent. He compared notes with the Ambassador on his
confirmed Washington events and accepted the Ambassador's
suggestion to schedule bipartisan meetings with key members
of Congress. End summary.

Wants to Build Peacekeeping and Security Cooperation
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2. (S) President Kikwete told the Ambassador at their April
29 meeting that earlier in the week he had gone over the
agenda for his Washington meetings with his Defense and
Security team; on May 4 he will huddle with the Economic
team. He noted that the Tanzania's intelligence service and
the CIA, as well as the police force and the FBI are "working
together well," and he now would like to upgrade the capacity
of the military and the immigration services by expanding
cooperation with the U.S. "My Defense Team agreed we want to
be proactive in developing our (mil-to-mil) relationship with
the United States; some misunderstandings were cleared up in
that meeting, and now we are on the right track," he stated.


3. (S) The Ambassador said he had discussed with the Ministry
of Foreign Affairs April 27 the prospect of capacity building
to carry out surveillance overflights and hoped the
Government of Tanzania's (GOT) defense forces were also eager
to improve coastal border surveillance. Kikwete affirmed
that his Defense Team would be prepared to look to the U.S.
as a "friend" to assist with capacity building in the
Tanzanian Peoples Defense Force's (TPDF) coastal patrols as
long as the U.S. Navy does not "just come in and leave
without any sustainable capacity building. If that were the
case, it would be a step backward and we may need to look
elsewhere." Kikwete was clear that if the U.S. military is
able to assist with capacity building in surveillance
overflights and coastal security, then Tanzania welcomed
partnership with the United States.


4. (C) President Kikwete confirmed that he wants to announce
Tanzania's ACOTA partnership in Washington. He welcomed the
invitation from U.S. Department of Defense (DOD) to bring
Defense Minister Kapuya to Washington, shortly after
Kikwete's own trip, in order to explore strengthening the
military to military relationship. Kikwete also requested
that as soon as possible after those consultations, a U.S.
military delegation come to Tanzania to continue the dialogue
with TPDF leaders. When the Ambassador suggested that it
might be time to consider placing a defense attache at
Tanzania's Embassy in Washington, the President replied
without hesitation: "Yes, we could do that."

Request to Fight East African Organized Crime Rings

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5. (C) Kikwete was satisfied with the ongoing cooperation
between Tanzanian and U.S. intelligence and law enforcement
agencies and asked to accelerate these efforts to sharpen
Tanzania's ability to fight terrorism, illegal drugs and
organized crime. He expressed his concern over "growing and
dangerous" organized crime rings within East Africa that are
becoming "big business." As reported Ref B, over the past
eight months, Zanzibar and Dar es Salaam have seen a rapid
upswing in high-stake armed robberies of banks, money
transfer vehicles, and hotels. Kikwete elaborated why GOT
law officials are convinced these crimes are masterminded by
other East Africans, "primarily Kenyans," using Tanzanians as
accomplices. He said he raised the need for regional
cooperation to bring down these crime rings during his recent
visits to Kenya and Uganda, but the respective heads of state
gave him only "evasive" replies. Thus, he is looking to the
U.S. for assistance to fight East African organized crime.


6. (C) President Kikwete explained that the confession of a
recently arrested Kenyan, caught using a Tanzanian alias and
trying to sell a vehicle stolen from Nairobi, has confirmed
the "Kenyan connection," including a lucrative "hot car" ring
operating along the Nairobi-Moshi-Arusha road and an increase
in theft of tanzanite gemstones (a semi-precious stone mined
only in Tanzania). The President quipped: "These East
African links to organized crime are our 'Axis of Evil'." He
requested whether ongoing FBI training for Tanzanian law
enforcement officials that usually takes place in the U.S.
could be conducted in-country: "If the programs were held
here," he noted, "we could train up to three or perhaps ten
times more police officials and seriously improve capacity."
(Comment: Virtually all FBI training is already conducted in
Tanzania.) Kikwete would like to see a special police school
established in Tanzania to "competently train our Criminal
Investigation Division" and plans to make this request during
his Washington visit.

Urgency to Link the "Look Out" System at Border Posts
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7. (C) The President highlighted his concern that Tanzania's
immigration security is jeopardized because only three land
border posts have a computer system to check if persons
entering Tanzania are in immigration's "look out" list. At
present, none of these computers are connected to one another
nor to immigration headquarters. Kikwete stressed that
computers are needed "at all our border posts, a system that
is complete and linked to headquarters" to allow immigration
officials to immediately check on any person and decide
whether to grant him entry or not. "This is another key area
where we are looking for increased cooperation," he stated.

Agreed to Sign MCA Threshold Agreement in DC
--------------

8. (SBU) President Kikwete understood the importance of
quickly finalizing and signing the Millennium Challenge
Account (MCA) Threshold Agreement to clear the way for a
viable MCC compact, and agreed to initial or sign the MCA
Threshold while in Washington. The Ambassador noted that
MCC's working level team was currently in the country,
looking at the road, water and power sectors. While overall,
the MCC is positive about Tanzania's progress toward a
compact proposal, the team had serious concerns about the
energy sector. MCC believes for Tanzania to make an
"economic leap," sustainable power generation is crucial;
however, a prerequisite to any substantial MCC investment
would be a transparent system for setting the electricity
tariffs.

Reform Needed in Energy Sector
--------------

9. (SBU) President Kikwete agreed energy should be a major
component of the MCC compact. In his personal view, he sees
no reason not to liberalize the power sector and let to
private utility companies compete and determine the price.
He confided, however, the energy tariff question is a

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sensitive issue without a simple solution in sight. Due to
the historic legacy of centralized decisions, many energy
sector officials insist the GOT needs to regulate electricity
in order to maintain control. In reality, Kikwete said, "we
have struggled with this approach and too many times it has
tied us in knots" rather than improve the situation in the
power sector.


10. (C) Kikwete said that TANESCO had made a request in 2005
to former President Benjamin Mkapa to increase electricity
tariffs by 25 percent. "Mkapa left this one for me, at the
top of my 'to do' list when I took office," he laughed.
TANESCO's request was "a headache" during his early weeks in
office, because every time a 25 percent tariff hike was
mentioned, the business sector complained loudly that such a
drastic increase would push production costs prohibitively
high. Kikwete initially allowed the TANESCO Board to
increase the tariff by 5 percent, which is within the Board's
discretion, then decided that any further increases needed to
be a Cabinet-level decision.


11. (C) The President explained after the Minister of
Energy's presentation and ensuing Cabinet discussion, two
issues that surfaced were concern over the management of
TANESCO and a reluctance to raise energy prices further if
the increase was possibly a cover-up for inefficient
management. The Cabinet recommended to first take a close
look at how TANESCO was being managed, and only then, revisit
whether to increase tariffs by an additional 20 percent.
Kikwete's own view is that, for a start, the GOT might let
TANESCO increase the rates by another 10 percent and after
the thorough scrutiny of the TANESCO management, consider
allowing a further hike up to the 25 percent level the Board
had requested.


12. (C) The Ambassador stressed the importance of
transparency in the power sector, noting that during a recent
TANESCO tender, one reputable U.S. energy company that had
made a very competitive bid, expressed to him their concern
over the transparency of the TANESCO Board's decision-making
process. The U.S. firm, already invested in locomotives and
airports in Tanzania, was only asking for the chance to
compete fairly in the power sector. Kikwete acknowledged he
had received complaints about that particular tender which
was issued by TANESCO in an attempt to solve the current
ongoing energy crisis. He had heard from many quarters that
the TANESCO management often waits for a South African
company to bid on a given tender; in several instances, if no
SA company stepped up, then TANESCO had called off the
tender. Kikwete stated: "We are concerned about these delays
and canceled tenders just because no South African Company
made a bid; thus I support the Cabinet's decision to first
closely examine how TANESCO is being managed."


13. (C) When the Ambassador suggested that perhaps TANESCO
needs competition, the President said that, personally, he
would fully agree. However, Kikwete shared his Minister of
Energy's concern whether privately-run utility companies
would fulfill their power purchase agreements and meet the
required capacity checks. Kikwete's believes that "we should
give the private companies the challenge to produce,
distribute and sell energy." He expressed his relief that
President Mkapa had decided to get the GOT out of the
petroleum-pricing business which formerly was regulated
through government subsidies, etc. "Now as oil prices
continue to go up, the GOT cannot be blamed," he said. "We
are fortunate." In the long term, Kikwete would prefer to
"take the same road with electricity tariffs and let the
market decide."

Recognized Need for Better Anti-TIP Laws
--------------

14. (SBU) Ambassador Retzer outlined the tier system of
State's annual Trafficking in Persons (TIP) Report and
explained that to remain a Tier 2 country, Tanzania needs to
make steady progress in drafting tighter laws, prosecuting

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offenders and keeping accurate statistics. The Ambassador
added that the Embassy had met with the newly-appointed
Inspector General of Police (IGP) who asked for technical
assistance to draft such laws and set up an anti-trafficking
in persons task force or special office. The U.S. Dept of
Justice (DOJ) has expertise in anti-TIP laws and is ready to
assist. The Ambassador asked President Kikwete if he would
agree to announce or sign such a technical assistance
agreement while in Washington and Kikwete saw no problem.
Kikwete said that putting adequate laws on the books against
human trafficking is crucial and his Ministry of Justice
would be ready to work with the DOJ.

Zanzibar
--------------

15. (C) Ambassador Retzer shared the Embassy's proposed
Democracy and Human Rights projects and USAID's ongoing
health and education projects for Zanzibar. Kikwete
expressed his appreciation for these U.S. initiatives and
assured the Ambassador that internal discussions about
Zanzibar reconciliation are ongoing within the Union
government, the Government of Zanzibar and the CCM. "We are
slowly gaining an understanding; I am speaking to President
Karume and others from our side, carefully looking for the
way forward." Kikwete said he hopes for a breakthrough
within the next two to three months. "Personally," he added,
"I am very concerned about the divide between Pemba and
Unguja, although others may not have the same mind or
understand my fears. So we will continue to try."

Aware of Used Clothing Tariff Issue
--------------

16. (SBU) The Ambassador said if President Kikwete does meet
with USTR, the current 45 percent East African Customs Union
tariff on imported used clothing will certainly be raised.
Kikwete said he considered the present tariff on used
clothing to be too high, since there is a market among
Tanzania's poorer people to buy used clothes at a reasonable
price. The current tariff rate is a compromise among the
three EAC Customs Union nations; he claimed that Kenya had
insisted on a high used clothing tariff and, at one point,
was pushing for a complete ban. While Kikwete thought the
current ban on imports of used undergarments should continue,
he is open to exploring within the EAC Customs Union whether
to further reduce the tariff on outer garments (i.e. T-shirts
suits, women's apparel, etc.)

Updates to U.S. Visit Schedule
--------------

17. (SBU) The Ambassador and the President compared schedules
for Kikwete's U.S. trip. The Ambassador suggested that, in
addition to the already confirmed meetings with Secretary
Rice, Dr. Mark Dybol of the Office of Global Aids
Coordination (OGAC),and the MCC, Kikwete should meet with
Ambassador Tobias, the AID Director who oversees USG Foreign
Assistance, and with Members of Congress from both sides of
the aisle. The Ambassador said that Senator Thad Cochran (R)
would like to host lunch in the Senate Dining Room and
mentioned the possibility of an evening reception in
President Kikwete's honor hosted by members of the House of
Representatives. The President accepted all these
suggestions.


18. (SBU) The President said that Good Works International, a
consulting group with former Ambassador Andrew Young, is
primarily setting up meetings in Boston and New York "but
does not have a monopoly on my schedule." Kikwete added his
staff has confirmed meetings with the IMF, World Bank
Director Paul Wolfowitz, the Corporate Council on Africa, Ted
Turner, and possibly with USTR. He noted that he will meet
the Deputy UN Secretary General since Kofi Annan will not be
in New York. He also wanted to meet Bill Gates to discuss
whether the Gates Foundation could provide support for the IT
department of a new state university President Kikwete is
creating. However, neither Gates nor former President
Clinton will be on the East Coast during Kikwete's visit, so

DAR ES SAL 00000715 005 OF 005


he plans to meet with them at a later date.

Comment
--------------

19. (C) While looking somewhat tired from his trip to
Zimbabwe, we were struck in our meeting by two things.
First, President Kikwete was extremely well briefed on
existing areas of cooperation with the U.S. Secondly, he
displayed evident intensity and focus on taking the
relationship with the U.S. to a new level. He opened his
meeting with Ambassador Retzer by twice repeating that he
wanted to "proactively" expand the relationship, and
concluded with these words: "We have to build up (the
relationship) to the highest level; there is so much we can
do. I believe friendship with the U.S. can help us." There
is little more we can add to what Kikwete himself made (yet
again) crystal clear: we have a unique opportunity here to
take the relationship to new levels, and advance U.S.
interests across the board. We must seize the opportunity.
RETZER