MCC CEO VISITS TANZANIA: GREAT EXPECTATIONS

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000168

SIPDIS

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DEPT FOR AF/A B YODER AND D MALAC
ALSO FOR MCC FOR G BREVNOV AND M KAVANAUGH

E.O. 12958: N/A
TAGS: EAID PREL PGOV EFIN ECON ETRD TZ
SUBJECT: MCC CEO VISITS TANZANIA: GREAT EXPECTATIONS


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1. (SBU) SUMMARY. During his visit to Tanzania from January
28-30, Ambassador Danilovich, Chief Executive Officer of the
Millennium Challenge Corporation (MCC),commended Tanzania's
engagement in the MCC Compact process. Repeatedly, he
expressed his confidence that the MCC would successfully
conclude a Compact with Tanzania and that the Compact would
be the largest Compact the MCC had ever signed. Throughout a
series of high-level meetings, key GOT officials including,
President Kikwete and President Karume, underlined their
appreciation for the MCC, their high expectations, and their
hope that the Compact would be concluded as soon as possible.
Without specifying an exact date, Ambassador Danilovich
assured the GOT that he expected the Compact to be concluded
before the end of the calendar year. In addition to
discussions on the Compact, Ambassador Danilovich stressed
the importance of the Millennium Challenge Account (MCA)
Threshold Program as a "stepping stone" to a full Compact.
The GOT assured MCC delegates that it would uphold its "end
of the bargain", implementing all components of the Threshold
Program including the Financial Intelligence Unit (FIU),
which the GOT said would be operational by July 1, 2007. END
SUMMARY.


MCC CEO: Confident About Success in Tanzania
--------------

2. (SBU) Ambassador Danilovich commended the President of
the United Republic of Tanzania, Jakaya Kikwete, President of
Zanzibar, Amani Abeid Karume, and Minister of Finance, Zakia
Meghji, for submitting an "excellent" Compact proposal to the
MCC. He emphasized the dedication which the Government of
Tanzania (GOT) had demonstrated and said he had every
confidence the MCC would conclude a successful compact in
Tanzania.


3. (SBU) "For MCC, we have only praise and appreciation,"
President Kikwete said, summarizing the GOT's sentiment to
Ambassador Danilovich during their meeting on January 28.
Kikwete assured Ambassador Danilovich that whatever remained
on Tanzania's side of the bargain "would be taken care of,"
noting that any delays with respect to establishment of the
Financial Intelligence Unit (FIU) were "merely bureaucratic."
Kikwete highlighted that he had signed the Anti-Money
Laundering Bill and that he expected Parliament to pass the
Anti-Corruption Bill in 2007. President Karume, Minister
Meghji and other ministers echoed this sentiment throughout
the MCC delegation's visit, expressing gratitude and great
expectations for the Compact to have a nationwide impact on
economic growth.

MCC in Tanzania: Largest Compact to Date
--------------

4. (SBU) In the first of several meetings with the MCC
delegation, Minister Meghji expressed her hope that the main
projects in the GOT's Compact proposal would "sail through."
She noted that there were additional projects outlined in the
addendum to the GOT's proposal which she hoped might also be
considered. Ambassador Danilovich cautioned Meghji on adding
projects at this stage of the process, explaining that the
MCC Investment Committee had already approved advancement of
Tanzania's proposal to the due diligence phase. Adding
projects, he noted, could cause delay and raise difficulties
given financial constraints facing MCC.


5. (SBU) Ambassador Danilovich pointed out that while the
amount was not yet final, Tanzania's Compact was likely going
to be the largest Compact the MCC had ever signed. To date,
Ghana's Compact is the largest, totaling USD 547 million. In
the final wrap-up meeting on January 30, Minister Meghji
assured Ambassador Danilovich that the GOT understood the
resource limitations facing MCC and said that the GOT would
not seek to add any projects from the addendum project list.
She reiterated the GOT's great expectations for the Compact
and the transformational impact it would have on economic
growth. She stressed Tanzania's interest in quickly moving
through the due diligence process and arriving at the point
of Compact signing as soon as possible.



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Compact Timing: Balancing Speed and Quality
--------------

6. (SBU) On timing for conclusion of the Compact, Ambassador
Danilovich stressed the need to "balance speed and quality."
Without predicting a specific date, Ambassador Danilovich
told President Kikwete, President Karume and Minister Meghji,
that the Compact would be concluded before the end of the
year. Ambassador Danilovich explained to Kikwete that the
USG was currently facing a continuing resolution in Congress
but that the MCC was hopeful to deal with any budget
constraints and move forward. President Kikwete said that he
had heard about various issues related to MCC in the press
and was very relieved to hear that the Compact for Tanzania
was on track for 2007.


MCA Threshold: A Stepping Stone to Compact
--------------

7. (SBU) In addition to the MCC Compact, Ambassador
Danilovich held discussions regarding the MCA Threshold
Program, reminding the GOT that the Threshold Program was an
important "stepping stone" to a full Compact. He stressed
the need to reach targets in each area of the Threshold
program including establishment of the Financial Intelligence
Unit (FIU),stating that the Compact "cannot happen without
the FIU." Gray Mgonja, Permanent Secretary at the Ministry
of Finance and the GOT's point of contact for the Threshold
Program, told Ambassador Danilovich that he understood the
MCA Threshold was a sort of "trigger" for the Compact.


8. (SBU) With respect to establishment of the FIU - one of
the four main components of the MCA Threshold program -
Mgonja told Ambassador Danilovich that the FIU would be
operational by July 1, 2007. Ambassador Danilovich noted
that having an operational FIU was crucial to the Compact and
repeated the need for the FIU to meet the international
standards set by the Egmont Group. Mgonja said the GOT would
move quickly toward making the FIU operational and added that
the FIU Stakeholders, Roundtable discussion, which the GOT
had postponed in January 2007, would be held in March 2007
after the February session of Parliament. Mgonja admitted
that the GOT, together with the USG and other stakeholders,
would need to define "operational" and determine the best use
of resources and expertise to ensure a fully functioning,
well-equipped FIU.


9. (SBU) Ambassador Danilovich also met with the newly
appointed Director General of the Prevention of Corruption
Bureau (PCB),Edward Hoseah, to discuss anti-corruption
efforts in Tanzania. Hoseah explained to Ambassador
Danilovich that strengthening the legal framework was of
paramount importance to improving the environment to
prosecute corruption. Hoseah noted that the Anti-Corruption
Bill would be presented to Parliament in February 2007 for a
first reading and would most likely be passed by Parliament
during the April 2007 session. By covering areas such as
procurement, tendering, and abuse of position, and including
a whistle-blowers provision, Hoseah said that the new
legislation "would give the PCB teeth."


10. (SBU) With regard to the Threshold targets, Hoseah said
he had full confidence that the GOT would reach the target of
28 prosecutions in 2007. Highlighting that the MCC was
gearing up to bring in hundreds of millions of dollars to
Tanzania, Ambassador Danilovich emphasized the importance of
a strong, well-functioning PCB. Hoseah agreed, stating his
primary goal was to make corruption a high-risk activity and
to make sure that money given to Tanzania reached the
intended beneficiaries.

Comment: Honeymoon Before the Wedding
--------------

11. (U) The MCC and the GOT did not get into detailed
discussions of specific Compact projects or implementation
mechanisms. Rather, Ambassador Danilovich's visit affirmed
that the Compact process was on track in Tanzania and due to
be concluded before the end of the year. The GOT made no
secret of their high expectations for the MCC grant and

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demonstrated that securing this grant was high priority.

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President Kikwete, who returned to Tanzania between his trips
to Davos and Addis Ababa, told Ambassador Danilovich, "I
could not miss this meeting! I needed to be here." While at
the due diligence and implementation stages there will
inevitably be some complications, this visit reflected the
good will and enthusiasm on both sides for the MCC venture.
There was no trace of discord regarding the GOT's progress on
the Threshold Program, but Ambassador Danilovich, together
with his team, did provide an unambiguous reminder that
Compact funds are contingent upon successful implementation
of the Threshold Program. END COMMENT.
RETZER