Identifier
Created
Classification
Origin
08LILONGWE63
2008-01-29 14:47:00
UNCLASSIFIED
Embassy Lilongwe
Cable title:  

MILLENNIUM CHALLENGE CORPORATION (MCC) INITIAL

Tags:  EAID ECON KMCA MCC PGOV PREL MI 
pdf how-to read a cable
VZCZCXRO4047
RR RUEHDT RUEHLMC RUEHMR RUEHPA RUEHPB
DE RUEHLG #0063/01 0291447
ZNR UUUUU ZZH
R 291447Z JAN 08
FM AMEMBASSY LILONGWE
TO RUEHC/SECSTATE WASHDC 5008
INFO RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC
RUCNMCM/MCC COLLECTIVE
UNCLAS SECTION 01 OF 04 LILONGWE 000063 

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON KMCA MCC PGOV PREL MI
SUBJECT: MILLENNIUM CHALLENGE CORPORATION (MCC) INITIAL
VISIT TO MALAWI

REF: 07 STATE 168510

LILONGWE 00000063 001.2 OF 004


UNCLAS SECTION 01 OF 04 LILONGWE 000063

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON KMCA MCC PGOV PREL MI
SUBJECT: MILLENNIUM CHALLENGE CORPORATION (MCC) INITIAL
VISIT TO MALAWI

REF: 07 STATE 168510

LILONGWE 00000063 001.2 OF 004



1. (U) SUMMARY: A Millennium Challenge Corporation (MCC)
team headed by VP John Hewko visited Malawi January 13-17 to
initiate the compact development process following Malawi,s
selection as compact eligible in 2007 (reftel). The visit
provided an opportunity to meet with a variety of
stakeholders to explain the compact development process. The
MCC team met with President Mutharika, GOM cabinet officials,
Parliamentary leaders, the two main opposition leaders, and
representatives from civil society, NGOs, academia, the
private sector and the international donor community. MCC VP
Hewko also gave interviews to a range of media. The visit
achieved its key objectives, publicizing the compact process
and emphasizing for all stakeholders the importance of
broad-based engagement in the MCC consultative process. The
GOM and the stakeholders in Malawi seemed to understand the
message and appeared ready to move ahead, despite concerns
that the process could become politicized as the country
approaches national elections. Hewko discussed with each
group the importance of managing expectations for timing of
Compact signing, especially in light of May 09 presidential
elections. The next step in the process is for the GOM to
name a Point Of Contact (POC) in order to begin engaging with
the MCC technical team. End summary.


2. (U) Millennium Challenge Corporation Vice President for
Compact Development John Hewko, Director of Compact
Development Jerry Dutkewych and Malawi Compact Development
team member Valeria McFarren visited Malawi January 13-17.
The visit, the first since Malawi was selected by MCC as a
compact eligible country (reftel),provided an opportunity
for MCC personnel to meet with a variety of stakeholders to
explain the compact development process.

MEETING WITH THE PRESIDENT
--------------


3. (SBU) Despite some initial scheduling difficulties, the
team ultimately held a warm and productive meeting with
Malawian President Bingu wa Mutharika Mutharika, accompanied

by Finance Minister Goodall Gondwe and Presidential Advisor
Dr. Peter Mutharika (the President's brother),impressed the
team with his knowledge of MCC processes and recognition of
what needed to be done to successfully conclude a compact.
The President discussed his efforts to rebuild the public
sector and to bring growth to the country since taking
office. Faulting international financial institutions for
their emphasis on macroeconomic stability, he emphasized
growth policies, but within a stable political environment
with respect for human rights, rule of law, and free
elections was also crucial. Mutharika countered opposition
claims that he has not upheld the rule of law by citing the
number of anti-corruption cases brought by his government and
emphasizing that there were no political prisoners or
detainees under his administration. Mutharika was insistent
that aid programs do not succeed without Malawian ownership,
and characterized an eventual MCC compact as an excellent
opportunity to craft a Malawian program to benefit the
country. The president reviewed the six &priorities within
priorities8 of the Malawi Growth and Development Strategy
(MGDS) and welcomed the flexibility of the MCC program to
further the MGDS. Finance Minister Gondwe commented that
Malawi was already well versed in consultative processes
after using similar approaches to develop the MGDS and
various poverty reduction strategy papers. The president
agreed that he would keep politics and elections out of the
MCC process, saying he wanted to get the machinery in place
quickly so it could not be derailed.

BRIEFING THE CABINET
--------------


4. (U) Prior to the MCC visit, some strains within the GOM
were already appearing, with the Ministry of Economic
Planning and Development (which had had the lead on the MCC
Threshold Program) expressing unhappiness with a lack of
communication from the Ministry of Finance. The meeting with
Cabinet ministers succeeded in conveying the need for the
compact development process to be broad-based and inclusive.
There was still some skepticism from some ministers about the
feasibility and necessity of the consultation process
described. Citing the MGDS, some felt that the GOM had
already completed a review of its development needs. Another
minister argued the success achieved in Malawi through its
fertilizer subsidy program and asked why MCC could not be
used to support such a program. Overall, however, the
ministers seemed to understand the messages conveyed by Hewko
and did not appear to be focused only on what MCC could do

LILONGWE 00000063 002.2 OF 004


for their ministry. We are told that a subsequent Cabinet
meeting chaired by the President overwhelmingly endorsed the
MCC approach.

OPPOSITION BASHES GOM
--------------


5. (SBU) In his meeting with the MCC team, opposition Malawi
Congress Party (MCP) leader John Tembo questioned why Malawi
was selected for compact eligibility, stating that the MCP
didn,t believe the indicators. Tembo cited the lack of
local government elections, the prorogation of parliament,
the stalemate on the electoral commission, and the long-time
absence of an Anti-Corruption Board (ACB) director as areas
where the current government acted unlawfully. Regarding
consultations, Tembo suggested that the village chief level
was the most appropriate to get the broadest range of
suggestions for programs but he advised avoiding the
Traditional Authorities (T/As) since they were beholden to
government due to their large raises this year. Tembo was
pleased to hear that an independent entity would be used to
implement any compact despite a government majority on the
board. After hearing how the Gambia lost compact
eligibility, the MCP was pleased that MCC could be used to
&hold the government's feet to the fire.8 Finally, Tembo
suggested that agriculture, social services, education,
health, and transport were the most likely sectors to focus
an MCC compact. Despite being open to engage in the compact
development process, he warned that the MCP remained
unconvinced that the indicators were accurate, or that the
process would really be broad-based, consultative, and
apolitical with the current government in control.


6. (SBU) The MCC team also met with former President and
leader of the opposition United Democratic Front (UDF) Baliki
Muluzi and 10 other UDF members. In many respects the UDF
meeting echoed the MCP meeting. Muluzi himself chose to stay
above the fray, but the other UDF leaders present attacked
the MCC indicators with examples of the current government,s
shortcomings. They cited GOM failure to control corruption,
maintain rule of law, provide good governance, adequate
education, health care, or economic growth for the nation.
The Ambassador told the UDF that he hoped the UDF could get
behind the MCC project and realize the potential benefit to
the poor. He also stressed the opportunity that MCC
represented for Malawi - a grant with no strings attached
that the nation itself could decide what to do with - and
urged the UDF not to politicize it. Overall, the UDF
appeared the least willing to engage cooperatively in the
compact process. This meeting highlighted the likely
difficulties in keeping the compact process apolitical,
broadly consultative and quick. The Ambassador will continue
this dialogue with Muluzi and the UDF in the coming weeks.

PARLIAMENT
--------------


7. (U) The meeting with parliamentary leaders was very well
attended, with most of the committee chairs (all from the
opposition) present. The members listened attentively to the
MCC presentation and appeared eager to become engaged in the
compact development process. They thanked the MCC for the
helpful support the Parliament had received under the MCC
Threshold Program, and asked that the support continue during
the compact phase. The MCC team encouraged the group to
request such support in their compact proposal. MPs focused
on the need for Malawi,s performance on indicators to remain
satisfactory in order to access funding. VP Hewko explained
that under most circumstances, countries were given an
opportunity to address performance slippage before funding
was suspended. In response to questioning, Hewko clarified
that Malawi,s performance on indicators was compared to
other peer countries, not an absolute assessment. It would
also be essential to maintain progress on the implementation
of the MCC-funded projects themselves, he added. Opposition
MPs suggested that opposition leaders participate in the
board of Malawi,s eventual compact implementing entity.

CIVIL SOCIETY AND THE PRIVATE SECTOR
--------------


8. (U) Similarly, the meetings with civil society and the
private sector were well attended (despite some last minute
schedule changes). Several participants expressed interest
in providing input into the process. Private sector business
leaders in particular appeared eager to highlight current
constraints to investment in Malawi, such as costs of
transportation and power.


LILONGWE 00000063 003.2 OF 004


ACADEMICS
--------------


9. (U) The MCC team met over lunch with a group of senior
University of Malawi officials. The group included
representatives from the economic, law, and political science
faculties. The MCC team had a chance to engage some of the
people who could prove to be valuable resources for Malawi in
its compact development. Notably, Dr. Winford Masanjala,
Head of the Economics Department, observed that all of the
economists with advanced degrees in Malawi are in academia,
not government, a statement that is not entirely true.

SMALL DINNERS WITH PROMINENT LEADERS
--------------


10. (U) The MCC team was able to meet in a more relaxed
setting with prominent political, business and media leaders
in a series of three dinners held during the visit. In
addition to allowing the team to impress several influential
figures in Malawi with the important points of the MCC
process, these dinners also provided a unique opportunity for
the team to receive candid feedback about the political and
economic dynamics in Malawi. Former vice-president Justin
Malawezi recalled several past efforts to consult the general
public on development priorities, including the UNDP-funded
&Malawi Vision 20/208 exercise conducted in the
mid-1990,s. He urged that the MCC build on, rather than
simply ignore, such past efforts. Hewko expressed the
importance of de-politicizing the MCC process which includes
the appointment of a full-time POC that transcends political
parties, has the support of the government and works well
with the private sector and civil society. In response,
these leaders recommended a couple of POC candidates that fit
this criteria.

MEDIA
--------------


11. (U) The Embassy Public Affair Section developed a robust
program to allow the MCC team to get their message to the
media. Interviews were held with television, radio, and
Malawi,s two largest newspapers, and a press conference was
also held, reaching a yet wider group of media outlets. The
team,s dinner with press editors provided another
opportunity to stress the importance of accurate and unbiased
reporting to the compact development process.


12. (U) The visit received very positive media coverage.
Interviews with VP Hewko were carried as full page stories in
leading newspapers as well as on Malawi,s leading television
news program.

DEVELOPMENT PROJECT VISIT
--------------


13. (U) The MCC team was able to make a site visit to a
small scale development project in rural Malawi. This
project, funded through USAID and PL-480, includes
irrigation, micro-finance, health and nutrition, and
institutional strengthening elements. The visit provided an
impressive illustration of the potential grass roots impact
that MCC assistance could bring.

MAIN THEMES
--------------


14. (U) Despite some scheduling difficulties, especially
regarding the meeting with Mutharika, the MCC team was
generally received very well. All sectors of society and
government in Malawi seem eager to seize the opportunity
represented by MCC. On the whole, the team achieved its
objectives of informing Malawi,s stakeholders how the
compact development process will work, and in particular the
need for broad-based consultations. Key contacts
acknowledged the importance of selecting an able and
respected individual to lead Malawi,s compact development
process.


15. (U) Overall the GOM and other stakeholders seemed to
understand the MCC message, although not without reservations
and exceptions in some quarters. There is clearly a danger
of the process becoming politicized, especially with national
elections scheduled for 2009. The UDF seemed particularly
reluctant to engage in a spirit of cooperation. There was
also concern that a possible change of government could
interrupt compact negotiations.


16. (U) One recurring theme from several of the meetings was

LILONGWE 00000063 004.2 OF 004


a clear desire to streamline the consultation process.
Several interlocutors noted that Malawi has engaged in
multiple such processes in the past and suggested that it
would be a duplication of effort to start over again from
square one.
EASTHAM