TANZANIA: SECRETARY PAULSON AND PRESIDENT KIKWETE DISCUSS

UNCLAS DAR ES SALAAM 001587 SIPDIS SENSITIVE, SIPDIS TREASURY FOR CLOWERY, VBRANDON DEPT AF/E FOR JLIDDLE, AF/EPS FOR ABREITER COMMERCE/ITA FOR BERKUL PASS TO USTR FOR FLISER, WJACKSON ADDIS FOR AU MISSION E.O. 12958: N/A TAGS: ETRD EFIN EAID ECON PREL TZ SUBJECT: TANZANIA: SECRETARY PAULSON AND PRESIDENT KIKWETE DISCUSS CAPITAL MARKETS, BOEING AND GOOD GOVERNANCE Summary -------------- ¶1. (U) President Jakaya Kikwete told U.S. Secretary of Treasury, Henry Paulson, on November 15 that he would welcome more capital market investment in Tanzania to accelerate economic growth and raise the per capita income. Secretary Paulson expressed appreciation for both President Kikwete and Finance Minister Zakia Meghji's strong leadership. He reminded President Kikwete that the Air Tanzania Company (ATC) needed to maintain high levels of transparency and accountability in deciding which aircraft to purchase or lease to expand its aging fleet. Secretary Paulson pledged to continue to work closely with Tanzania's finance ministry and to advocate in Washington DC for policies to strengthen East African regional economic growth. End summary. ¶2. (U) During a cordial discussion at the conclusion of his two-day trip to Arusha, Tanzania, Secretary Paulson outlined for President Kikwete the highlights of his November 14 to 15 visit. Paulson noted that the working lunch with the East African Finance Ministers had focused on capital markets and infrastructure needs within the region. He commended the innovative USAID wildlife project he observed at Manyara Ranch as well an Arusha mosquito net factory he toured earlier in the day. The Secretary highlighted the factory as an example of the USG and Government of Tanzania (GOT)'s joint efforts to fight poverty and eradicate malaria at the same time. ¶3. (SBU) Secretary Paulson told President Kikwete he had emphasized to the EAC Finance Ministers as well as to the press, the strong, consistent support that President Bush has given to the fight against malaria and against HIV/AIDS Africa. The Secretary also expressed his appreciation to President Kikwete that the draft Tourism Act 2007, which had raised serious concerns among U.S.-owned safari companies in Tanzania, would not be tabled in Parliament until early 2008. This postponement would allow stakeholders enough time to forward their comments and discuss their concerns with officials at the Ministry of Natural Resources and Tourism. HIV/AIDS and Malaria Campaigns -------------- ¶4. (U) President Kikwete thanked the Secretary for his visit and emphasized that the relationship between Tanzania and the U.S. is "better than ever." He noted that during his two meetings with the President last year: "President Bush expressed appreciation for our growing bilateral relationship; we intend to continue to cooperate in many areas." ¶5. (U) President Kikwete outlined the progress that has been made in Tanzania in the fight against both HIV/AIDS and malaria. He said that nationwide HIV/AIDS testing campaign had reached 1.9 million persons to date in 2007, as compared to only 250,000 Tanzanians during the same time period in 2006. In the anti-malaria campaign, Kikwete stressed that the GOT is working closely with the United States and other partners to reach 26 critical areas in Tanzania where the malaria infection rate is the highest. ¶6. (SBU) President Kikwete noted that the signing of the MCC compact would initiate critical projects to improve Tanzania's road, water and power networks. He reiterated that his administration is committed to good governance. "We listen to our friends: if they say you need to go this way, we take note," President Kikwete affirmed. He added, "In some areas we are not doing as well as in others, but our government is committed to respect human rights, rule of law, transparency and accountability." Ambassador Green stressed that the MCC compact opened up a unique opportunity to make substantial progress in economic development as well as transparency and accountability. Boeing -------------- ¶7. (SBU) While encouraging President Kikwete to keep up the fight against corruption, Secretary Paulson noted the USG's concern that the ongoing deliberations of Air Tanzania to expand its fleet by purchasing or leasing planes from either Boeing or Airbus did not appear transparent. Paulson emphasized the importance of following internationally accepted standards. President Kikwete replied he had received reports that the acquisition process "may not have been handled properly" and subsequently asked for a briefing from the Permanent Secretary of Infrastructure. He had learned that the Board of Air Tanzania Company (ATC) chose not to carry out an open tender, but rather had requested proposals directly from three companies. Only Boeing and Airbus had responded with business and financial proposals. He understood that key factors in the ATC Board deliberation was the delivery dates of the aircraft and 2) the commercial offers. ¶8. (SBU) President Kikwete said when he had met with Assistant USTR Florie Liser on November 12, she had voiced similar concerns over ATC's acquisition process. He thus gave instructions for the ATC Board to meet AUSTR Liser on November 13 and to be open and answer all her questions about what had transpired to date. Kikwete explained that ATC had decided to lease, then purchase Airbus planes for the shorter, regional routes. For the longer routes to the United Kingdom or China, the ATC Board preferred Boeing aircraft. However, since the delivery date for larger Boeing aircraft was not until 2018, plans were currently being discussed to lease Boeing planes in the near future to cover the longer routes. ¶9. (SBU) Secretary Paulson expressed appreciation for President Kikwete's close involvement in this and other important economic decisions. The Secretary suggested, however, that such high-level acquisition decisions needed to be handled properly, not just from a GOT internal perspective, but equally, if not more importantly, in a manner to assure the process is transparent to all bidders and to the public. "When there is good governance," Paulson stressed, "the entire process would be open and allow all parties to know the criteria through a Request for Proposals." Also, once a decision is made, the award should be publicly announced so that both the winner and the loser know the basis for the final decision. Capital Markets -------------- ¶10. (SBU) Kikwete expressed his "impatience" that the capital market flows into Tanzania and the region were not adequate. "We need a variety of capital markets," he stated. Secretary Paulson assured him that the USG was ready to work with the East African region. He pointed out that the Department of Treasury has a resident regional expert from its Office of Technical Assistance (OTA) based in Nairobi who is working throughout the East African Region to advise in this area. ¶11. (U) Kikwete remarked that during his 2006 trip to New York he had visited NASDAQ and the New York Stock Exchange; both organizations were ready to assist and deepen the relationship with Tanzania. The President added: "I realize that Tanzania's capital markets are still small, but we are ready to work with others to restructure our institutions." Kikwete noted that Tanzania still has a very low per capita income of less than USD 370: "Many countries have been as poor as we are, but now they are better off." Secretary Paulson emphasized that his discussions with the EAC finance ministers had been highly encouraging. He would report back to Washington and recommend programs to deepen cooperation with the GOT and other regional governments. ¶12. (U) President Kikwete reiterated his appreciation for the close cooperation with President Bush's administration: "We would like to keep it that way; our relationship has never been this close to the United States before." Secretary Paulson concluded with the assurance that the Treasury Department will work closely with Tanzania's Finance Minister, Zakia Meghji, and with the other EAC finance ministers and would continue to advocate in Washington to support East African economic growth. GREEN