UNCLAS SECTION 01 OF 03 LUANDA 000219

SIPDIS

SENSITIVE
SIPDIS

H, PLEASE PASS SOONEST TO STAFFDEL PHALEN

E.O. 12958: N/A
TAGS: PREL OREP ECON EPET EFIN AO
SUBJECT: SCENESETTER FOR STAFFDEL PHALEN'S MARCH 18-22
VISIT TO ANGOLA


1. (U) Embassy Luanda warmly welcomes the visit of
Professional Staff Members from the Senate Committee on
Foreign Relations Michael Phalen and Neil Brown on March
18-22. This is the first visit by Congressional Professional
Staff to Angola and provides an opportunity to discuss key
bilateral issues such as good governance, the upcoming
legislative elections, fiscal transparency, and cooperation
aimed at fostering diverse economic growth. Your visit will
move our bi-lateral dialogue forward with government
officials, political party leaders, and other decision makers
in Angola.

Overview
--------------


2. (U) Six years after the end in 2002 of a 27-year civil
war, Angola is at a pivotal juncture in its development and
reconstruction. A healthy, democratic, peaceful, secure, and
prosperous Angola is vital to both regional stability and
prosperity and US national security interests. Our principal
goals are consolidating Angola's democratic transition and
strengthening the country's ability to use more efficiently
its vast natural resources to improve the well-being of all
citizens.


3. (SBU) Perhaps the greatest constraint to improving our
ties with the Angolan government and the military in
particular is our history with Angola. President dos Santos
has publicly chastised the powers that interfered in colonial
and post-independence Angola for not helping rebuild the
country after decades of civil war, and he includes the U.S.
in that group. Many of Angola's civilian and military
leaders fought against rebels backed by the U.S. and blame
the U.S. for the suffering inflicted by those rebels on their
families. Some Angolans seek to strengthen ties with the
U.S., but many key political and military leaders continue to
be wary of U.S. intentions.

Politics and Elections
--------------


4. (SBU) While nominally a multi-party democracy, Angola is
dominated by the Popular Movement for the Liberation of
Angola (MPLA) and a very strong chief executive (now in
office

for 28 years) - Jose Eduardo Dos Santos. Angola's
only democratic elections since independence in 1975 were
held in 1992. The results were contested by Jonas Savimbi,
leader of the opposition party Union for the Total
Independence of Angola (UNITA), and resulted in the
resumption of civil war for another decade. Savimbi was
killed in battle in February 2002, and a formal peace accord
was signed shortly thereafter.


5. (U) In December 2006, President Dos Santos and opposition
parties reached agreement to hold legislative elections in
2008 and presidential elections in 2009. Initial voter
registration was completed in September 2007 with over 8
million Angolans registering to vote, a number that exceeded
expectations. On December 28th, 2007, President dos Santos
announced that legislative elections would be held on
September 5th and 6th 2008; while he must still formally
"call" elections 90 days prior to the election, all signs
indicate the oft-postponed elections are on track for
September.


6. (U) U.S. assistance for democracy-building and good
governance in FY 07 was approximately $8.3 million. Our
programs are administered through USAID and executed by
International Republican Institute (IRI), the National
Democratic Institute (NDI), IFES, World Learning, Development
Alternatives Inc., the Academy for Educational Development
and CARE. They focus on building civil society capacity,
strengthening political parties, increasing fiscal
transparency, improving delivery of social services, and
providing limited technical assistance to the Angolan
institutions and officials.

Economics
--------------


7. (U) Angola's economy is one of the fastest growing in the
world, driven by booming oil production. Production,
officially capped by OPEC at 1.9 million barrels per day
(bpd), is projected to reach over 2.2 million bpd by the end
of 2008. Angola's economy grew by 19.5 percent in 2006 and
23.4 percent in 2007, and is expected to match or beat that
pace in 2008. Inflation was reduced from triple digits near
the end of the war to just under 12 percent last year.
Thanks again to petroleum revenues, foreign exchange reserves

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are growing. Angola is our seventh largest source of foreign
oil. With increasing oil revenues and extensive lines of
credit supplied by the Chinese, Portuguese, Brazilian, and
other governments, Angola is now in the midst of major
infrastructure rebuilding.


8. (U) Angola's tremendous oil wealth has allowed it to come
out from under a severe debt burden generated during the
civil war years. The government deficit is under control and
foreign reserve accounts are flush with capital from
extractive industries, namely oil and diamonds. Outside
these industries, however, the Angolan economy continues to
sputter. Agriculture is slowly returning to the countryside,
while manufacturing and service industries are scarce and
generate few jobs to address the nation's burgeoning
unemployment problem.


9. (U) According to the World Bank's 2007 "Doing Business"
index, Angola ranks 167 out of 178 countries in promoting an
open and efficient business climate. Angola's rankings in
the categories of "starting a business" (173 out of 178) and
"enforcing contracts" (176 out of 178) are of particular
concern.

Transparency
--------------


10. (SBU) Under pressure from the international community,
the Angolan government has made strides towards greater
transparency by publishing financial information and working
to limit extra-budgetary expenditures. Published budget
documents have grown more detailed from year to year, but the
2006, 2007 and 2008 budgets still place a substantial portion
of expenditures under vague headings like "administrative
costs." The government has been implementing a
government-wide accounting system, but the poor execution
rate of budgeted expenditures remains a problem. The
accountability of budgeted yet unspent funds and oil revenue
beyond the published reference price (USD 55) remains an area
of concern. The Court of Accounts (Tribunal de Contas)
reviews cases of official financial misconduct, but the
published case load shows few convictions. Angola is a
signatory to the UN Convention Against Corruption.


11. (SBU) Angola lacks a conflict of interest restriction
that would limit the participation of government officials in
private sector opportunities related to their public
responsibilities. Petty corruption is a problem worsened by
low civil service salaries and a proliferation of bureaucracy
and regulations that present opportunities for rent-seeking.
Complicated procedures and long bureaucratic delays sometimes
tempt investors to seek quicker service and approval by
paying "gratuities" and "facilitation fees". Transparency
International's 2007 Corruption Perception Index (CPI) placed
Angola at 147 out of 163 countries.


12. (SBU) Although Angola's public and private companies
historically did not use transparent accounting systems
consistent with international norms, IMF demands have spurred
audits of Angola's largest public companies by major
international accounting firms. In 2007, the Government of
Angola announced that it would not enter into a formal
program with the IMF, but did agree to continue Article IV
consultations with the IMF. The Angolan Government does not
participate in the Extractive Industries Transparency
Initiative, although it has taken many of the steps necessary
to qualify for the program. The government approved an audit
law in 2002 that requires audits for all "large" companies,
but it has not yet been possible to enforce this rule due to
the lack of a professional accounting oversight body. The
National Bank of Angola hopes to foster a professional body
of accountants to enforce standards and certify qualified
accountants. US firms operating in Angola are required to
adhere to the Foreign Corrupt Practices Act.

Development and US Assistance
--------------


13. (U) While Angola shows signs of growth and development,
the country still has some of the worst social indicators in
the world. Although statistical data are imprecise, best
international estimates are that sixty-eight percent of the
population lives in poverty, 26 percent in abject poverty.
Life expectancy is forty-seven years, more than 30 percent
lower than the average for developing nations; infant
mortality, maternal mortality and other measures of the
quality of life are among the worst in the world. Fertility
is very high - an average of 6.9 births per woman.


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14. (U) Our USAID programs are aimed at assisting Angola to
address the many major challenges it faces to achieve
long-term stability and progress in translating wealth into
an appreciably improved quality of life for its citizens.
Our flagship program is the President's Malaria Initiative
(PMI), which seeks to halve by 2010 mortality from malaria
among children under five - and we're on track to do that.
The Angolan government, in particular the Health Ministry,
has been closely involved in the program and collaboration
with other donors is strong. In FY07, the second year of
implementation, PMI sprayed over 110,000 houses (reaching
over 500,000 Angolans), distributed over 90,000 bed nets and
furnished over 2.4 million treatments for malaria.


15. (U) The USG is also highly visible in the fight against
HIV/AIDS. Angola presents a unique opportunity to combat the
spread of HIV/AIDS. According to CDC data, Angola has a
relatively low prevalence rate (2.1% among adults in 2007),
but areas bordering higher-prevalence countries have rates
four to five times as large and are rising. Many of the
factors conducive to an increase in the prevalence rate of
HIV/AIDS are in place: the early age of sexual debut, the
frequent use of multiple concurrent partners, and improved
transportation routes, which encourages interaction with
neighboring countries which have significantly higher
prevalence rates. The USG - CDC, USAID, DOS and DOD - is
working closely with the Angolan Ministry of Health, private
partners and NGOs to implement the national plan against
HIV-AIDS.


16. (U) The U.S. promotes a prosperous, economically diverse
Angola though programs which work to improve the policy
environment for private sector entrepreneurship in the
non-oil economy, with particular attention to developing
Angola's rich agricultural potential. Leveraging resources
from multilateral lenders, other bilateral donors, and the
government's own efforts, these programs include work with
the National Bank to promote systemic reform and ensure
sustained economic growth through sound monetary policy and
credit reform in support of small and medium enterprises
small and medium enterprises; agricultural development and
finance; land tenure reform and strengthening; improving
fiscal control and programming in the Ministry of Finance;
and capacity building in youth through Junior Achievement
Angola.


17. (U) Angola also remains one of the most heavily
land-mined countries in the world, and USG assistance
provides around USD 6 million to support humanitarian
landmine clearance and the destruction of excess and unstable
weapons and munitions. We also support capacity-building
within the Angolan National Demining Commission to strengthen
the Angolan capacity to manage the national demining program
and take over the major role played by international NGOs in
landmine clearance.

Human Rights Improving, but Capacity a Constraint
-------------- --------------


18. (U) Angola's human rights record remains poor. The
country's overburdened judicial system remains a poor
protector of individual rights. Several high-profile cases
in 2007 drew attention to the role of the government in
fueling self-censorship of the media and continuing
restrictions on the freedom of movement within Angola for
journalists and others. Elements of the military and police
security forces continue to disregard human rights and the
government has failed to investigate allegations of abuse. A
high-profile report released in December 2007 by Doctors
without Borders (MSF) accused Angolan security forces of
severely abusing and systematically raping illegal Congolese
immigrants during expulsion operations in the remote province
of Lunda Norte; despite the Army Chief of Staff's promise
that the allegations would be investigated, no further report
has been issued.


19. (U) Prisons are overcrowded with harsh conditions,
especially in the provinces. The NGO movement is still
nascent, but there are some indigenous organizations tracking
human rights abuses and working with the GRA to train the
national police on human rights issues.


20. (U) USG-funded programs have helped train police through
the International Law Enforcement Academy (ILEA) Gaborone
facility. In addition, USG-funded international organization
partners in Angola have provided training on specific issues
such as trafficking in persons and child rights.
MOZENA