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06ULAANBAATAR671 2006-09-08 07:40:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ulaanbaatar
Cable title:  

Codel Kolbe Advances U.S. Interests

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DE RUEHUM #0671/01 2510740
P 080740Z SEP 06




E.O. 12958: N/A
SUBJECT: Codel Kolbe Advances U.S. Interests


1. (U) SUMMARY: During a September 1-3 visit, Codel Kolbe examined
U.S. assistance programs in Mongolia, with a particular focus on the
proposed Millennium Challenge Account (MCA) program. The Codel
stressed that qualifying for MCA is not enough, and that Mongolia
will need to take the time and effort to put together a good
proposal. They urged enhanced anti-corruption efforts. In meetings
with Mongolia's senior leaders, they also urged that Mongolia's 7th
rotation of troops to Iraq be consistent with the size of the
current rotation. END SUMMARY.

Meetings with Political Leadership


2.(SBU) Chairman Kolbe, Rep. Baird and Rep. Crenshaw met separately
with President Enkhbayar, Speaker Nyamdorj, and Prime Minister
Enkhbold. The Codel also was briefed on USAID projects, and had
meetings with U.S. businessmen and Peace Corps volunteers.

3. (SBU) MCA: In all three meetings with Mongolia's political
leadership, the Mongolians expressed disappointment that "after
three years, Mongolia still has not received MCA funding." Chairman
Kolbe praised Mongolia for remaining eligible for funding for three
consecutive years and explained that being eligible does not mean
that funding will automatically follow. He emphasized that every
country must re-qualify every year by performing above the median on
a series of tough, objective criteria. The criteria were selected
after careful study of available international surveys and, while
not perfect, were the best available. He explained that funding is
not automatic: eligible countries must submit and negotiate a
proposal that will satisfy the MCC, the U.S. Congress -- and
ultimately the American taxpayer. MCA is unique in its goal and
procedures; it is intended to be transformational. In Mongolia's
case, Mongolia did not submit a proposal until October 2005 and the
proposal is complex and requires considerable refinement during the
due diligence phase. The proposed projects must reduce poverty and
be financially sustainable. He recognized that lack of capacity on
the Mongolian side is a problem, but noted that negotiating a
compact takes time. It is better to do it right than do it quickly.
He encouraged Mongolia to invest in its proposal and promised to
discuss with MCC CEO Danilovich how to ensure that sufficient
resources have been devoted to enabling Mongolia to refine its
proposal. Representative Baird observed that many Americans
question the wisdom and utility of U.S. foreign aid programs in
general. In order to defend MCA to domestic critics, the USG must
be able to demonstrate that the money is being used wisely and is
not corrupted or diverted.

4. (SBU) FTA: In all three meetings, the Mongolian interlocutors
urged that U.S. to conclude a Free Trade Agreement (FTA) with
Mongolia and noted with satisfaction parallel non-binding "sense of
congress" resolutions being developed in both the House and the
Senate, urging the Administration to enter into an FTA with
Mongolia. Chairman Kolbe noted that as an "ardent free trader" he
generally supports FTAs, but only the President can negotiate these.
In the case of Mongolia, the U.S. reluctance to proceed stems not
just from the fact that the two-way trade volume is small and there
are other, higher country priorities. It also stems from the fact
that Mongolia has to do its homework. Representative Baird noted
that certain benchmarks (laws and regimes) must first be in place
before the U.S. Congress will approve an FTA: e.g., protection for
labor; protection for the environment, and IPR protection.

5. (SBU) OIF: In all his meetings, Chairman Kolbe urged Mongolian
decision-makers to remain committed to Operation Iraqi Freedom (OIF)
and to send a 7th rotation that is equal in number to the current
deployment. He underscored that Mongolia's participation is more
than just symbolic; Mongolian peacekeepers perform a vital,
strategic role in protecting the Polish Command headquarters at Camp
Echo. He noted that he had met with Mongolian veterans of OIF and
was impressed with the enthusiasm and pride they conveyed.



6. (SBU) President Enkhbayar raised the issue of corruption of
Mongolia and the need to fight it. He noted that the first-ever
anti-corruption law had been passed in July. But, he said, passing
the law was the easy part; effective implementation will be the
challenge. He stated that in order to fight corruption, other laws
need to be amended as well, beginning with civil service reform.
"The civil service today is a political patronage system. Ministers
hire their friends and family. They are serving not the interests
of the nation, but their own private interests." The first step
will be to take politics out of the civil service by requiring all
civil servants to be apolitical and renounce political party
membership. Enkhbayar also noted with some irony that the
MPRP-proposed windfall profit tax on gold is resulting in
corruption: gold miners are either hoarding or smuggling the gold
out of the country to avoid the tax, with the result that the
central bank (Bank of Mongolia) is concerned about the precipitous
drop in the amount of gold being sold to the bank.

7. (U) The Ambassador hosted a luncheon with four Members of
Parliament, including Munh-Orgil (MPRP and head of Legal Standing
Committee), Idevhten (MPRP Caucus leader), Dondog (MPRP and head of
State Structure Standing Committee), and Gonchigdorj (Democratic
Party and head of the Foreign Affairs and Defense Standing
Committee). Discussions focused on the ongoing Millennium Challenge
Account (MCA) negotiations and the lack of progress to reach a final
agreement on a compact. Munh-Orgil engaged in a particularly frank
discussion with the Codel on his frustration with what he sees as
the United States' "preoccupation with corruption." He agreed that
politicization of the civil service is a problem which helps produce
corruption, but said that low salaries also are a key factor. The
Codel responded that the GOM needs to combat corruption in a
systematic way before an MCA compact can be reached and reiterated
the U.S. position that due to the unique nature of the MCA that both
sides need to work closely together to agree on a final package.

Review of Mongolia's MCA Proposal


8. (SBU) Codel Kolbe discussed the Mongolian MCA proposals in detail
with key officials of the Mongolian MCA National Council, including
State Secretary for Finance Khurelbaatar, MCA National Council
Secretary General Enkhtuya, and representatives for the Mongolian

working groups on health, vocational education, information
technology, and railroad projects. The Codel visited two potential
MCA project sites: the diagnostic center at the National Cancer
Center and a vocational school.



9. (U) The Codel met with LTG Togoo, Chief of Staff of the Mongolian
Armed Forces. The meeting focused on FMF and IMET while LTG Togoo
spoke on Mongolian Armed Forces (MAF) peacekeeping capabilities and
goals. Togoo stressed how money from the Global Peace Operations
Support Initiative (GPOI) plays a big part in preparing the MAF to
participate in UN missions and hope GPOI funding will not decrease
in the future. LTG Togoo cited the recent GPOI-supported
peacekeeping exercise, Khaan Quest 2006, as a noteworthy success
story. The Codel also met with 20 Mongolian soldiers who had
deployed to OIF, OEF, Kosovo, or Sierra Leone. When the CODEL asked
the soldiers if they volunteered for these missions, all answered
affirmatively and emphasized that their deployments "provided a good
training opportunity."

Public Diplomacy


10. (U) Eagle TV, the top-rated TV news source in Mongolia,
interviewed Chairman Kolbe and ran the 30-minute interview in its
entirety and rebroadcast it several times on Sunday, September 3.
Rep. Kolbe discussed the MCA process, and thanked Mongolia for its
contributions in Iraq and Afghanistan, highlighting how these
contributions serve Mongolia's national interests. In addition,
Chairman Kolbe answered questions on U.S. visas and the immigration
reform debate.

11. (U) The Codel did not have an opportunity to clear this cable
before departing.