Prime Minister Reviews Bilateral Relationship

UNCLAS SECTION 01 OF 03 ULAANBAATAR 000137

SIPDIS

STATE PASS USTR FOR T. WINELAND
STATE PASS PEACE CORPS
STATE PASS TO USAID, ATTN CDOWNEY, ANE/EA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL MOPS PHUM ETRD PGOV KMCA PTER PINR
MG, IQ
SUBJECT: Prime Minister Reviews Bilateral Relationship


SENSITIVE BUT UNCLASSIFIED -- NOT FOR INTERNET
DISTRIBUTION.


1. (SBU) SUMMARY AND COMMENT: Prime Minister Enkhbold
reaffirmed his government's commitment to close
relations with the United States during an hour-long
initial call by the Ambassador on February 23.
Enkhbold confirmed that the Cabinet had decided the
previous day to approve a sixth rotation of troops to
Iraq, and stated his government would continue its
existing policies, including support for the war
against terror. In response to the Ambassador's
warning that concerns over corruption could endanger
Mongolia's Millennium Challenge Account eligibility,
Enkhbold stated his government's commitment to taking
strong anti-corruption steps, including passage of
legislation in the next session of Parliament and
punishing corrupt officials. While Enkhbold lacks a
foreign policy background, he appeared w|m-pregef nQ4hkzi&fheL8u>GQi-4k4>
ikQd;~;,`uQQQQBJQll on
Enkhbold after the formation of the new government in
late January.

Ambassador Reviews Bilateral Agenda
--------------


3. (SBU) Drawing on talking points which she left
behind, the Ambassador reviewed the bilateral agenda:

-- Recalling President Bush's congratulatory note to
Enkhbold, she stated that Enkhbold's return letter
affirming the new government's commitment to work with
the U.S. on a broad agenda, and to continue economic
and democratic reforms and strengthen anti-corruption
efforts, had been welcomed in Washington.

-- The Ambassador expressed appreciation for the
Cabinet's approval the previous day of a sixth rotation
of Mongolian troops to support Coalition operations in
Iraq.

-- The Ambassador noted the busy schedule of meetings
which demonstrated the continuity of close ties: the
Consultations on Bilateral, Regional and Global Issues
(CBRGI) between MFA and the State Department this week;
the Trade and Investment Framework Agreement (TIFA)
discussions in early March; and the bilateral Executive
Steering Council on Defense Reform meetings in
Ulaanbaatar in early March.

-- The Ambassador added that the U.S. military
representatives would welcome a meeting with the Prime
Minister, and could help clarify how and when funds
allocated by the U.S. to Mongolia last year under the
Global Peace Support Operations Initiative and the
Coalition Solidarity Fund would be spent.

-- The Ambassador reviewed the status of Mongolia's
Millennium Challenge Account (MCA) proposals, noting
that U.S. teams were visiting Mongolia now to undertake
"due diligence." If all went well, this phase might be
finished in April, a compact concluded later in the
year, and funds disbursed in early 2007. She noted,
however, that this is dependent on continuity in
Mongolia's proposals, and commitment of sufficient GOM
experts to finish work.

-- The Ambassador also noted that an MCA compact also
depends on Mongolia's continued eligibility, which is
reviewed annually. The most important test for
Mongolia will be corruption, where the score has been
declining; if it declines much further, Mongolia may
well become ineligible. She continued that there are

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two other issues that could also force suspension of
all or part of the MCA program for Mongolia. Failure
to correct the deficiencies and poor governance at the
Bank of Mongolia and the Ministry of Finance as noted
by the IMF and other donors is a major potential
obstacle. Another is the ongoing commercial dispute
involving the Mongolian railroad and an American
company; a breach of contract by the railroad would
jeopardize MCA funding for the railroad project
proposed by Mongolia.

-- The Ambassador noted that the Embassy regularly
meets with members of the State Great Hural (SGH) and
GOM officials on legislation of interest to the U.S.
because it affects our ability to work with Mongolia.
She said she would send over briefing papers the
Embassy is slated to draw up before the spring session
in April, but wished to highlight three issues. The
first was pointed out by President Bush in Ulaanbaatar
last November: We hope Mongolia will pass the necessary
legislation to implement its commitments under the UN
Convention Against Corruption. Second, she urged, the
State Secrets Act should be substantially repealed or
revised; the secrecy it engenders is one reason
corruption flourishes, and it creates a variety of
other problems. Finally, passage of the anti-money
laundering law would improve our ability to work
together with Mongolia.

PRIME MINISTER REAFFIRMS COMMITMENT TO RELATIONSHIP
-------------- --------------


3. (SBU) Prime Minister Enkhbold, speaking in
Mongolian without notes, responded by expressing
appreciation for U.S. support of Mongolia's democratic
and economic reforms since 1990. He noted that
Mongolia seemed to have an increased profile in U.S.
policy in recent years, which had created a favorable
environment for improved bilateral relations under the
"comprehensive partnership." Last year had been a
remarkable year, with first-ever visits by President
Bush and Speaker Hastert giving significant additional
impetus to relations. President Bush's speech in
Ulaanbaatar had been broadly welcomed by the Mongolian
people, who had noted the praise for Mongolia's
achievements since 1990, and were grateful that the
President had reaffirmed that the United States is
Mongolia's "third neighbor." The Joint Statement
issued by the two Presidents during the visit had
enunciated the desirability of guiding principles for
our bilateral relations. In that regard, Mongolia
looks forward to concluding a comprehensive partnership
framework agreement, he said.


4. (SBU) Enkhbold stated his government's commitment
to continue to develop bilateral relations, and to
implement previous agreements. His government would
take strong action to fight against corruption, improve
democracy, decrease red tape, and make the civil
service more effective. The PM commented that the
international community had recognized that the recent
change in government had been constitutional, and done
in accordance with democratic principles. President
Bush's congratulatory note also had demonstrated the
U.S. conviction that Mongolian democracy serves as a
good example for other countries.


5. (SBU) The PM reiterated that his government would
take strong action to create a corruption-free
environment. The government is working closely with
the SGH, and planned to pass anti-corruption
legislation in the spring session of the SGH. Severe
punishment would be imposed on officials who violate
the law. At the same time, media which falsely allege
corruption would be regarded as having committed
defamation. The guilt or innocence of officials
accused of corruption must be determined in court. The
government's efforts to improve pay and benefits for
civil servants should be regarded as a main means to

ULAANBAATA 00000137 003 OF 003


fight corruption, since it would provide them the means
to support their families without engaging in
corruption. Special attention would be paid to tax
evasion, and ensuring businesses paid taxes, not
bribes.


6. (SBU) With regard to the State Secrets Law, the PM
said, he agreed with the Ambassador that it should be
amended or reformed. He stated that the government
would ensure a favorable environment for domestic and
foreign investors. Like the previous governments,
Mongolia would continue to support U.S. policy against
international terrorism. He confirmed that Mongolia
had agreed to the U.S. request to send a sixth rotation
of troops to Iraq.


7. (SBU) With regard to the Millennium Challenge
Account, the PM said, Mongolia is very grateful to have
qualified for the last three years, which he attributed
to the progress made by Mongolia over 15 years of
economic and political reform. In his capacity as
Prime Minister, he said, he would pay special attention
to the new structure which would be required for MCA;
the Ministry of Finance is working on this. Mongolia
would provide both the experts and the information
needed by the MCC. He expressed confidence that the
work of the MCC experts would go smoothly, and a
compact signed in the near future.


8. (SBU) The PM stated that Mongolia is keen to
establish an FTA with the U.S. The TIFA had provided a
start toward an FTA. An FTA, he said, is not just an
economic matter, but also would demonstrate U.S.
political support for Mongolia. He noted that the
bilateral Joint Statement last November had touched on
the issue of more scholarships for Mongolian students
in the United States. He noted that the Ambassador had
raised the contract problem between GE and the
Mongolian railroad. He stated that his government is
paying attention to the issue. The railroad is looking
at how to fulfill the contract, he said, commenting
that the problem had been the railroad's financial
constraints.


9. (SBU) The Ambassador noted that, with regard to
student scholarships, the U.S. had confirmed at the
CBRGI discussions that it will increase Eisenhower and
Fulbright scholarships. Since the Federal Government
did not run universities, it has no direct way of
increasing university scholarships for Mongolian
students. However, she had talked with Ambassador Bold
about ways he might encourage U.S. universities to
grant more scholarships. She noted that the Embassy
supports a very active center in Ulaanbaatar to counsel
Mongolians who wish to study in the U.S., including
help in finding scholarships. She added that many of
the 92 Peace Corps Volunteers are also engaged in
English language teaching or educational projects.

SLUTZ