MCC Issues Briefer for Assistant Secretary Hill's June

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000327 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PREF MARR EAID KMCA MG SUBJECT: MCC Issues Briefer for Assistant Secretary Hill's June 14-18 Visit to Mongolia SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION ¶1. (SBU) The following draft bullets and talking points are provided in preparation for Assistant Secretary Hill's planned visit to Mongolia. ¶2. (SBU) Background: -- After three years of false starts and sometimes emotional give-and-take with MCC, there is very strong optimism that a Compact will finally be approved in the August-September timeframe (including MCC's internal Investment Committee approval, Board approval, and Congressional Notification). -- Mongolian politicians have claimed a publicly-perceived "link" between MCC and Mongolia's support for U.S. positions on a wide array of topics, particularly Iraq deployments. They hinted that slow progress of an MCC compact was a sign that Washington is not "rewarding" them for taking a politically risky position in support of the U.S. -- Signing a Compact this year will be a major advance forward for bilateral ties, and a major landmark in two countries' diplomatic relations, a fitting achievement for the 20th anniversary year for U.S.-Mongolia diplomatic relations. -- According to MCC, due diligence and assessment teams have visited Mongolia over the past several months, and the compact process is on track with only minor details and questions to attend to. MCC reports no "deal breakers" are seen on the horizon. -- A signing is expected to take place shortly after compact approval (ideally in October) as a deliverable during President Enkhbayar's expected visit to Washington this fall. If funded with FY 2008 money, as now seems likely, a Compact signing in October will remain dependent on Congress passing the budget in time. -- In its current (and most likely final) form, Mongolia's MCC Compact proposal has four components (with estimated project values): (A) Railway Project ($129 million) to improve the capacity and efficiency of Mongolia's sole railway artery on which virtually all goods flow, thereby reducing transport costs and promoting exports. (B) Health Project (about $12 million) focusing on prevention of non-Communicable diseases particularly: breast and cervical cancer, cardiovascular; and diabetes. These are major killers in Mongolia. (C) Vocational Education Project (about $15 million),will fund eight (out of Mongolia's current 35) model vocational education centers. Training will focus on "core curriculum" and "hard" areas like construction, heavy equipment, etc. (D) Property Rights Project: (amount unconfirmed) This project, still in flux, includes a peri-rrban land leasing and management lease programs that will lease some 1,000 tracts of peri-urban land to herder groups around major urban areas and will install or rehabilitate up to 1,000 wells on leased tracts of peri-urban land. -- Mongolians were very disappointed with the cutting of the health project's diagnostic and training center. -- Mongolia's current proposal is approximately $160 million, or half of its original proposal of $300 million. In recent years, USAID has averaged around $7 million, so the MCC Compact amounts to over 20 year's worth of assistance, which will be delivered over a five year period.. -- One area of concern, however, is with Russia's influence over the Railway project. The Russian Government owns 50% of the Mongolian Railway (MTZ) based on a 1949 agreement. The Mongolians are waiting until summer, when they will assume control of MTZ's rotating chairmanship, before discussing the project with their Russian counterparts, for fear of giving them a de facto veto power. ¶3. (SBU) Talking Points: -------------- -- We're glad that the work on the Compact now appears to be going smoothly and is on track for signing later this year. This will be a major step forward in bilateral relations in our joint effort to ULAANBAATA 00000327 002 OF 002 reduce poverty and promote sustainable economic development. It will reward and support the many tough, courageous economic and political choices Mongolia has made since 1990. -- We also hope to be able to sign the Compact in October, but Congress must pass the FY 2008 budget before the U.S. can sign the Compact. That is our law. -- (If raised) We are extremely grateful For Mongolia's deployments to Iraq and Afghanistan, and more than $10 million in assistance provided by the U.S. to Mongolia's military is a direct result of that gratitude. There are no link, however, between the MCA Compact and those deployments, which reflect Mongolia's wise recognition that playing a significant international peacekeeping role is in your own national interests. MINTON