TANZANIA, CORRUPTION, AND BOEING -- TALKING POINTS

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E.O. 12958: DECL: 10/17/2017
TAGS: ECON BEXP ETRD PREL EINV BTIO TZ
SUBJECT: TANZANIA, CORRUPTION, AND BOEING -- TALKING POINTS
FOR AF A/S FRAZER

REF: A. A) DAR ES SALAAM 01249

B. B) DAR ES SALAAM 01074

Classified By: Deputy Chief of Mission, D. Purnell Delly for
reasons 1.4 (a,d).


1. (C) Summary. The U.S. Mission here has aggressively
advocated on behalf of Boeing in its competition with Airbus
for replacement of Air Tanzania,s (ATC) aging fleet. Both
the Ambassador and DCM have called personally on the
Infrastructure Minister, the Ambassador has called on Air
Tanzania,s Chairman, and the DCM has used his relationship
with a close advisor to President Kikwete to repeatedly raise
the issue. This has corrected the more flagrant intimations
of corruption; for example, Kikwete,s advisor instructed ATC
to drop its demand that Boeing use an "agent" (a prominent
South Asian hotelier) to open doors with the Government.


2. (C) However, there remains every indication that this deal
was cooked from the outset. Months ago Air TanzaniqL)
anJ*fQ"1#s|9T.ion scandals here) made
his own announcement that Airbus had the deal, then denied
that was the case when we called on him. There have still
been no serious negotiations with Boeing, and every
indication that the ink is dry on an Airbus deal -- the
latest such indication, hardly a subtle one, being a full
page ad in the "New African" for Air Tanzania with its logo
prominently displayed on an Airbus 320. The only problem is
that Air Tanzania doesn,t own any Airbuses, at least not
yet. Boeing is firmly convinced there is neither
transparency nor a level playing field. Our concern is that
while we, and in fact President Kikwete, are working
tirelessly to strengthen the investment climate, poisoning
the water with a major U.S. corporation like Boeing vitiates
such efforts. We respectfully provide below the background
and talking points that Assistant Secretary Frazer has
requested for use with the Tanzania Ambassador. End summary.


3. (C) Despite aggressive efforts, we have made little
headway in convincing the Government of Tanzania (GOT) to
allow open and transparent competition for replacement of Air
Tanzania's aging fleet of passenger aircraft (Comment: Air
Tanzania Company (ATC) is fully owned by the GOT.) When
Boeing asked the Embassy to advocate on its behalf through
the International Trade Agency (ITA),Robert Faye, Boeing's
East African regional representative, expressed concerns
immediately about possible corruption. He said in late June
he had received the "unusual suggestion" from the CEO of Air
Tanzania, David Mattaka, that he work through a wealthy
Tanzanian businessman who is the managing director of Indian
Oceans Hotels (ref a). Faye told Air Tanzania that Boeing
never works through agents, nor should Tanzania, as it can
add tens of millions of dollars to the cost of acquisition in
"commissions." The DCM conveyed our concerns to a close
advisor of Kikwete at State House, and in subsequent meetings
between Boeing and ATC, Mattaka dropped his insistence on an
agent (Comment: Agents, commissions, and Swiss bank accounts
have figured large in other major corruption scandals here,
including Tanzania's purchase from BAE of a sophisticated,
$40 million military air traffic control system being
investigated by the UK Parliament.) Faye later told us his
contacts here were pointing to rumors that China was tying
aid to purchase of Airbuses in order to give business to the
joint manufacturing facility being built in China (ref b).


4. (C) In subsequent weeks, Faye met on numerous occasions
with Air Tanzania's CEO Mattaka, the Ministry of
Infrastructure's Director of Transportation, and the Deputy
Minister of Infrastructure, but never received any indication
that government or Air Tanzania decision-makers were prepared
to enter into serious negotiations. No "Request for
Proposal" (RFP) was ever made. Perhaps this should have come
as no surprise, because on two separate occasions, once in
August and again in early September, ATC CEO Mattaka and then
Infrastructure Minister Chenge announced to the media that
ATC had decided to lease, and later purchase, Airbus planes
to bring its fleet up to "world class standards." While in
private meetings with the Ambassador and Deputy Chief of
Mission GOT officials denied that any decision had been made,
an advertisement then appeared last week in a noted East
African trade journal showing Air Tanzania's new "Galloping

Giraffe" logo on a brand new Airbus A320 -- when at present
ATC owns only Boeing 737's.


5. (C) Ambassador Green has raised our concerns with
President Kikwete (September 12),with CEO Mattaka of Air
Tanzania (October 1) and with Minister of Infrastructure
(October 11). The DCM has raised the same concerns with the
Infrastructure Minister and a close advisor to President
Kikwete. They have both conveyed Boeing's concern that Air
Tanzania has not followed any systematic process to study and
analyze which of the two companies -- Boeing and Airbus --
are offering the better deal for the economic long-term
benefit of ATC. Both stressed that Boeing believes that the
GOT has either already made a deal or is currently in
non-transparent side negotiations with Airbus. Andrew
Chenge, the Minister of Infrastructure, is head of the
ministry that has oversight and ultimately decision-making
responsibility for Air Tanzania. He would be the minister to
recommend to the Cabinet which vendor Air Tanzania should
select. He is also, at the moment, mired in multiple
corruption scandals that have played across the front pages
of newspapers here for the past several weeks.


6. (C) We believe strongly that the course this issue is
taking may ultimately damage not only Boeing, but our efforts
(and President Kikwete's) to strengthen the investment
climate. Air Tanzania is looking to expand its fleet of two
Boeing 737's to a fleet of about ten planes, with the
potential to result in USD 537 million in sales for Boeing
(ref b). Done right, the deal will reinforce the impression
that Tanzania is a promising place to invest. Done wrongly,
it will reinforce impressions that have been building here
for the past eighteen months that this is a govenment without
the political will to tackle senior-level corruption.

Talking Points
--------------

7. (SBU) We suggest the following talking points for use with
the Tanzanian ambassador to the U.S.:

-- A large business delegation accompanied President
Kikwete to the United States in September 2007 looking to
partner with U.S. investors.

-- To attract U.S. investors, a transparent investment
climate in Tanzania is essential.

-- We are concerned that Air Tanzania is not creating a
level playing field for competition between Boeing and Airbus
for the lease and sale of new airplanes.

-- Twice in the last several months major newspapers have
quoted ATC CEO David Mattaka and then Infrastructure Minister
Andrew Chenge that Tanzania has decided to replace its aging
Boeing 737's with Airbuses.

-- This month, a full page ad in an East African trade
journal displays the new Air Tanzania logo on an Airbus A320
when currently ATC doesn't own any Airbus aircraft.

-- In private, your government has told Ambassador Green
that no decision has been made; yet to date, no serious
negotiations have been opened with Boeing, despite repeated
attempts to do so by Boeing's representative.

-- It is essential that Air Tanzania create a transparent
process and level playing field for both Boeing and Airbus.
The lack of such transparency in a major international
acquisition like this could seriously damage the investment
climate President Kikwete is working so hard to create.

-- I understand that retired U.S. Ambassador Thomas
Pickering, now a board member of Boeing, will sit on a panel
with President Kikwetea at the Corporate Council on Africa's
summit in South Africa next month. Boeing representatives
are seeking to set up a side bar meeting between them. We
support such a meeting, and trust it will clear the air on
the way forward.
DELLY