ZAMBIA ENTHUSIASTICALLY EMBRACES MCA COMPACT

UNCLAS SECTION 01 OF 02 LUSAKA 001184

SENSITIVE
SIPDIS

STATE FOR AF/S - M. SHIELDS
STATE ALSO FOR EEB/IFD/ODF - K. ENSTROM
MCC FOR J. HEWKO, D. TETER, AND S. RHOADES

E.O. 12958: N/A
TAGS: EAID ECON PREL KMCA ZA
SUBJECT: ZAMBIA ENTHUSIASTICALLY EMBRACES MCA COMPACT
PROCESS


1. (SBU) In a December 18 meeting, the Ambassador briefed
President Rupiah Banda on Zambia's newly announced Millennium
Challenge Account (MCA) compact eligibility. The Ambassador
stressed that the Millennium Challenge Corporation (MCC)
board had selected Zambia because of its commitment to
governing justly, promoting economic reform and investing in
its people, particularly in the areas of health and
education. The Ambassador described the first phases of MCA
compact development that would begin with an introductory
visit by MCC officials early in 2009. He cautioned that
Zambia must remain vigilant to maintain its eligibility
status throughout the approximately two year compact
negotiation process and it should pay particular attention to
anti-corruption efforts. (The Ambassador made a pitch to
pass long-stalled asset disclosure, whistleblower protection,
and anti-money laundering bills, but the President seemed not
to be well briefed on these.) The Ambassador underscored
that a focused, integrated, and rational MCA program that
reduces poverty through income generation, job creation and
sectoral and/or regional economic growth should "solve 100
percent of one or two problems rather than 10 percent of
several issues." The Ambassador urged the President to
appoint an empowered MCA Compact Coordinator and to include a
two to three million U.S. dollar line item in the Zambian
government's (GRZ's) 2009 budget (which will be presented to
parliament by February 2009) to fund the Zambian core team
and the compact negotiation process, including consultative
mechanisms and analyses of constraints to growth. Banda took
down a note and agreed to discuss it with the Finance
Minister. The Ambassador emphasized that an MCA compact was
a Zambian plan, led by the GRZ. To ensure broad ownership,
it should reflect the interests and positions of all Zambian
stakeholders. A clearly engaged, enthusiastic, and
interested Banda said MCA was "important" and indicated it
would definitely be a national priority over the coming
months. Banda did ask whether the negotiations could be
accelerated to cut the negotiation time to less than two
years. The Ambassador said that thorough preparation and
good organization on the Zambian side would certainly help,
but that compacts traditionally take 18 to 24 months to
complete.


2. (U) Also on December 18, DCM, P/E Chief, and USAID FSN
met with working level Ministry of Finance officials to
deliver similar messages. DCM reviewed expectations for the
MCC's initial introductory visit, previewed the MCC's
upcoming tasking to name a full-time, empowered POC and to
assembly a team comprised of an economist, a monitoring and
evaluation expert, and a person to design and implement a
consultative mechanism. DCM also underscored the urgency and
importance of including two to three million U.S. dollars in
a FY 09 budget line for conducting MCA compact negotiations.
After hearing the proposed timeline for constraint analysis,
consultation, concept preparation, appraisal and funding, GRZ
officials asked whether the two-year timeline could be
accelerated. P/E chief and DCM said that proper preparation
and organization could facilitate early phases, including the
introductory visit. Pamela Bwalya from the Finance Ministry
said that in October, MCC officials in Washington told her
that GRZ consultative processes in developing Zambia's (now
three year old) Fifth National Development Plan (FNDP) could
mean that the consultative phase might be curtailed. Another
official noted that both the preparation of the FNDP and the
ongoing mid-term review are analyzing the constraints to
growth in Zambia; she hoped to coordinate this process with
MCC's anticipated requests. P/E Chief provided MCC website
information to help GRZ officials prepare for the earliest
stages of the compact process.


3. (SBU) Comment: From top to bottom, the GRZ is anxious
to begin the MCA compact negotiations and eager to accelerate
the two-year process. The President and working level
Finance Ministry contacts were grateful for the briefings and
for the vote of confidence implied by eligibility. In the
coming days, Finance Ministry officials will travel to Dar es
Salaam to consult with Tanzanian officials on their
experiences negotiating an MCA compact. The Zambians are
also planning to consult with Namibian counterparts. The
request for a budget line item was sobering. One Finance
official, noting the U.S. request for a GRZ budget line item
commitment, pressed DCM for a USG commitment to MCA funding
in outyears given the change of administration in the United
States, new budgetary realties, and a looming recession.
Nonetheless, all got the message that Zambia must make this a
national priority or a compact is a "no go." Post would
welcome an MCC visit as early as possible in 2009, preferably
in the second half of January.

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