UNCLAS SECTION 01 OF 02 DAKAR 001508

SIPDIS

SIPDIS
SENSITIVE

STATE FOR AF/EPS AND AF/W

E.O.12958
TAGS: EAID KMCA PREL ECON SG
SUBJECT: REACTION TO MCC DECISION AND JAFZA DEAL: QUESTIONS FROM
THE OPPOSITION, DISAPPOINTMENT FROM THE POPULATION, CONCERN ABOUT
WHAT'S NEXT

REF: DAKAR 1276

DAKAR 00001508 001.2 OF 002


SUMMARY
--------------

1. (U) The Millennium Challenge Corporation's (MCC) decision to
withdraw from the "Diamniadio" industrial platform project (reftel)
has opened the door for Senegal's opposition politicians and press
to challenge President Abdoulaye Wade's administration on
governance, public finances, and commitment to poverty reduction.
It has also brought anxiety and disappointment to Diamniado's
population and locally elected officials. Cheikh Bamba Dieye, a
newly elected member of the National Assembly and advocate of the
Diamniadio residents, the NGO umbrella group CONGAD, and opposition
leaders have loudly condemned the decision and called for a public
debate to clarify why the GOS chose Jafza international's Special
Economic Zone proposal over the country's MCC compact proposal. A
joint U.S.-GOS statement on the decision released on June 27 was
widely covered by the local press. Most public criticism has been
directed at the GOS, with local media scrutinizing the terms of
reference under the GOS-Jafza agreement, with more questions likely
to be raised in the coming weeks. The MCC's continued interest in
completing a compact with Senegal, however, has also been noted.
End summary.

PUBLIC REACTION: NO ECONOMIC ZONE, WE WANT OUR PLATFORM IN
DIAMNIADIO
-------------- -

2. (U) The joint statement issued on June 27 to explain the MCC's
withdrawal from the Diamniadio Industrial Platform project has
created a state of concern and mistrust between the Diamniadio-area
population and the GOS. The local population has expressed
disappointment at losing the Platform project and its attendant
projections of infrastructure development and employment. Local
leaders and groups have publicly challenged the GOS's credibility
and leadership to have "removed" the Diamniadio project in favor of
Dubai-based Jafza International's proposal to establish Special
Economic Zones (SEZ) in Senegal. The population's frustration and
anger were widely reported by local press.

One resident stated, "We
have lost job opportunities for youth and wealth creation for our
population." Others questioned "why the GOS is preferring Jafza's
loan to MCC's grant?" During a large demonstration on the street of
Diamniadio on July 4, the residents chanted "No more Jafza, we want
our platform from MCC."


3. (U) On July 2, the civil society group CONGAD, an umbrella of
NGOs, sent a letter along with a petition signed by locally elected
officials from the department of Rufisque (15 kms from Diamniadio)
to the Ambassador to invite MCC to step back from its decision and
to "pursue effort in implementing the platform project." On July 6,
CONGAD also held a press conference to condemn the U.S.-GOS joint
statement and called the GOS's attitude "a failure."


4. (U) On the political side, Cheikh Bamba Dieye, a new opposition
member of the Parliament and strong advocate of the Diamniadio
Platform, criticized publicly, and in the National Assembly, the GOS
actions that caused the MCC to withdraw from the Platform project.
He also criticized the lack of transparency in the Jafza agreement.
Following regular parliamentary procedures, Dieye tabled on July 9
an oral question on the GOS-Jafza deal. However, without his
knowledge the question was subsequently removed from the list of
items to be discussed. Dieye told reporters, "I am scandalized by
the PDS-controlled Parliament's attitude. This demonstrates our
authorities' lack of transparency and good governance."


5. (U) Dieye has stated he will "petition the U.S. government to
reconsider its decision, claiming that "the Diamniadio platform is a
partnership between the U.S. tax payers and the Senegalese
population, and both the GOS and MCC are only intermediaries and
facilitators." Dieye told EconCouns "I am willing to pursue my
fight in the U.S. Congress to have MCC return back to Diamniadio.
He added that MCC's withdrawal will cause "damage" to Senegal's
rural population because of the importance of the project in
alleviating poverty. Dieye, who was not a Deputy on February 6 when
the National Assembly approved the law establishing special economic
zones on behalf of Jafza, claimed that it was approved "under strong
pressure from GOS," and added that "even the MPs who approved the
project could not remember the content of the project." [Note: it
has since been reported in the press that the law was passed while
only 16 of 120 Deputies were present. End note.] Omar Sarr,
spokesman of Rewmi, former Prime Minister Idrissa Seck's party, has
also weighed in, stating that he was "not surprised by MCC's
decision" and said the Jafza deal would turn out to be "the scandal
of the century."


DAKAR 00001508 002.2 OF 002


MEDIA REACTION
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6. (SBU) The opposition-oriented newspaper Sud Quotidien, in
particular, has continued to pursue this story. In a recent edition
it published a long history of the Diamniadio Platform project,
highlighting its economic benefits and the important due diligence
carried out by the MCC and the Senegalese implementing agency,
AMPMD, during the project's first phase. Sud Quotidien expressed
concern about the secretive nature of the GOS' negotiations with
Jafza and the quiet legislative maneuvering that created the special
conditions for Jafza's proposed project. The paper's editor claimed
that the National Assembly was officially on recess at the time the
law was passed. The same edition also speculated that the agreement
with Jafza hinged on the government's ability to "turn the MCC
project over to" the Dubai-based company, and not follow MCC
requirements for a fair and open public tender for the operator of
the Platform.

STILL TO COME
--------------

7. (SBU) The law authorizing Jafza to establish the special
economic zone is based on a feasibility study that offers extremely
generous concessions to the Dubai Ports World subsidiary. Sud
Quotidien and Deputy Dieye have begun to expose and ask questions
about the deal. Should a final agreement be signed under these
terms, Jafza would apparently:

-- be offered an initial designation of 10,000 hectares for the
Special Economic Zone, even though the feasibility study notes the
near-term demand requiring the development of only 260 ha;

-- be the sole entity authorized to run special economic or free
trade zones (under a very liberal definition) in Senegal;

-- be granted authority via Presidential decree to expand or
establish a special zone in any location; and

-- hold the authority within those zones to act on behalf of the
Prime Minister or any other minister.

COMMENT
--------------

8. (SBU) MCC's decision to withdraw from the Diamniadio platform
does present a significant lost opportunity for economic development
and jobs for the 20,000-plus residents of the Diamniadio area. Even
though there have been public rallies by that population for the
MCC's return, the public blame for the end of the Diamniadio project
has fallen squarely on the GOS for its unwillingness to follow
strict MCC standards of transparency and accountability. While some
commentators have doubted the MCC's intentions to ever sign a
compact with Senegal, this event seems to have recharged the press
and some members of civil society to hold the GOS accountable for
its deal-making. We expect that the GOS will answer Dieye's "oral
question" in the near future and work hard to get in front of this
brewing controversy. However, with Sud Quotidien beginning to dig
up the incredibly favorable (read: irresponsible) terms of reference
offered to Jafza to secure this agreement, this case may, in the
end, shine some much needed light on the special and exclusive deals
inked by the GOS over the past few months, including the contracts
for a new international airport, mining rights to the country's iron
reserves, management of the Port of Dakar container business, and
much of the mega- projects ("grands travaux") underway in
preparation for the proposed March 2008 Organization of the Islamic
Conference Summit in Dakar. While the MCC has already begun its
discussions on possibly articipating in Senegal's toll road
project, it's anybody's guess if Jafza will still make a majorinvestment in Senegal without the possibility of jumping on the
Platform.


9. (U) Visit Embassy Dakar's Intranet site at:
http://dakar.state.gov/htdocs/section/econSec tion.aspx and Embassy
Dakar's SIPRNET Web site at http://www.state.sgov.gov/p/af/dakar

SMITH