Identifier
Created
Classification
Origin
09CHISINAU217
2009-03-20 15:13:00
CONFIDENTIAL
Embassy Chisinau
Cable title:  

PRIME MINISTER INFORMED OF MCC THRESHOLD

Tags:  PREL PGOV KDEM PINR MD 
pdf how-to read a cable
VZCZCXRO5713
RR RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSR
DE RUEHCH #0217/01 0791513
ZNY CCCCC ZZH
R 201513Z MAR 09
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 7770
RUEHLMC/MCC WASHINGTON DC
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
C O N F I D E N T I A L SECTION 01 OF 03 CHISINAU 000217 

SIPDIS

STATE FOR EUR/UMB

E.O. 12958: DECL: 03/19/2019
TAGS: PREL PGOV KDEM PINR MD
SUBJECT: PRIME MINISTER INFORMED OF MCC THRESHOLD
AND COMPACT PROGRAMS STATUS

CHISINAU 00000217 001.2 OF 003


Classified By: Ambassador Asif J. Chaudhry for
reasons 1.4(b) and (d)

C O N F I D E N T I A L SECTION 01 OF 03 CHISINAU 000217

SIPDIS

STATE FOR EUR/UMB

E.O. 12958: DECL: 03/19/2019
TAGS: PREL PGOV KDEM PINR MD
SUBJECT: PRIME MINISTER INFORMED OF MCC THRESHOLD
AND COMPACT PROGRAMS STATUS

CHISINAU 00000217 001.2 OF 003


Classified By: Ambassador Asif J. Chaudhry for
reasons 1.4(b) and (d)


1. (C) Summary: In a March 19 meeting with Prime
Minister Zinaida Greceanii, Ambassador Chaudhry
discussed the status of the Millennium Challenge
Corporation's Compact and Threshold Country
programs. The Ambassador outlined the impact that
FY09 budget limitations would have on MCC and the
timeline for implementing the Compact. The
Ambassador noted that Moldova's performance would
have a direct impact upon the amount allocated to
the Compact and outlined the steps the GOM should
take on the CCECC Civilian Monitoring Board, the
road maintenance fund, and TIP to enhance its
position and possibly increase funding for
Moldova. The Ambassador also discussed the need
for signing the MCC Threshold Country Program
extension and the Prime Minister promised to do
so. End Summary.

Ambassador Chaudhry Outlines Status of Compact
Program
-------------- --------------
--------------


2. (C) The Ambassador informed the Prime Minister
that the U.S. Congress had recently approved the
FY09 budget for MCC, which had a direct impact on
Moldova's Compact program. The MCC budget for
FY09 was USD 875 million for all activities.
After administrative expenses, MCC would have
approximately USD 700 million available for two
Compacts in 2009. Moldova and Senegal were the
two countries eligible for Compact signings in
this fiscal year. The MCC Board of Directors
would consider both Compacts at approximately the
same time. The Ambassador noted that the size of
a country had a significant impact on the amount
of a Compact since the MCC Board would evaluate
how much MCC would spend per capita in a country.
Since Senegal had a population of 12 million while
Moldova had approximately four to five million
people, it was likely that Senegal would receive a
larger Compact. The Ambassador stated that the
Compact for Moldova could be as much as USD 300
million, perhaps as much as USD 325 million, but a
great deal depended on the GOM and its performance

in the coming months.


3. (C) The Ambassador explained that MCC was
conducting feasibility studies evaluating the
Economic Rate of Return (ERR) for proposed
activities in Moldova. If the feasibility studies
showed low justification for some part of the
project, the requested funding might not even
reach USD 300 million. However, expecting that
the justifiable project would require more than
the possible budget allocated to Moldova, a
decision would have to be made jointly with the
GOM as to which parts of the proposal to drop from
implementation The Ambassador further explained
that the MCC Board of Directors would also
consider the contributions made by Moldova and
Senegal in awarding Compact funds and emphasized
to the Prime Minister that Senegal had contributed
USD 17 million of its own funds to support Compact
development. He encouraged Moldova to evaluate
and document its own contributions to Compact
development.


4. (C) Ambassador Chaudhry said that the Compact
might not fund all the roads originally included
in the GOM's proposal. He said that he had asked
MCC to work closely with the GOM in making the
choices regarding which roads would take priority.
The Ambassador noted that MCC is conducting the
feasibility studies on all five roads as included
in the original proposal. This would be the only
means of making a fair assessment to correctly
prioritize the projects. The Prime Minister
reiterated this point to say that she would
request MCC not exclude any of the roads from the
feasibility studies and expressed the hope that
the GOM could use the results of the feasibility
studies to attract other investors for the
projects as included in the MCC Compact.

Compact Timeline

CHISINAU 00000217 002.2 OF 003


--------------


5. (C) The Ambassador reviewed the timeline for
MCC actions on the Compact for the Prime Minister.
The preliminary results of the feasibility studies
should be available in May and the analysis should
be completed by June. The MCC Investment
Committee would meet in July and negotiations with
the GOM on the Compact could take place in the
first week of August. The MCC Board of Directors
planned to meet around September 1 to consider
approval of the Compact and the tentative date for
the signing of the Compact would be mid-September.

Ambassador Outlined Steps for the GOM
--------------


6. (C) The Ambassador emphasized that the GOM
could improve its position for Compact
consideration by taking several steps. He said
that the MCC was preparing a letter for the GOM,
regarding the failure of the GOM to deliver on its
commitment to establish an adequately independent
Civilian Board for the Center for Combating
Economic Crime and Corruption (CCECC). The letter
from Washington would outline the concerns shared
by MCC, USAID and the U.S. Embassy.


7. (C) MCC was very concerned about the failure of
the GOM to meet its commitment to the
international donors' community to fund
maintenance of the roads to be rehabilitated under
the Compact. The Prime Minister expressed some
frustration with the World Bank because it had
not, in her opinion, comprehended that the GOM had
seriously addressed this issue. She said she
would discuss this issue with the World Bank. The
Prime Minister maintained that the GOM had
increased taxes to support the road rehabilitation
fund on January 1, 2009. The Ambassador noted
that he had received information that only 27
percent of the new revenue raised for road
maintenance was going to the road rehabilitation
fund, although the amount was supposed to be 80
percent. The Prime Minister reiterated that she
would talk with the World Bank and stated that the
Parliament had enacted legislation to ensure that
the necessary revenue would be raised for the
fund.


8. (C) The Ambassador noted that the USG continued
to be concerned about Moldova's TIP status. The
GOM had made progress and the USG recognized the
GOM's efforts. It was important for the GOM to
maintain momentum. Ambassador Chaudhry
underscored that new U.S. legislation
automatically downgraded countries listed on the
Tier 2 Watch List two years in a row to Tier 3. A
Tier 3 ranking would make Moldova ineligible for
the Compact.


9. (C) The Ambassador reiterated that MCC was
encouraging Compact countries to provide
contributions to Compact development and advised
the Prime Minister that Moldova should produce a
detailed accounting of all the GOM's contributions
to the Compact program such as staff, office
space, motor pool, etc.


10. (C) Finally, the Ambassador noted that the
misprocurement declarations by the World Bank and
EBRD on another road project with the
international donor community raised concerns.
The Prime Minister stated that the GOM was working
closely with the World Bank and EBRD to overcome
the misprocurement incident and work was
continuing on the road projects which had begun
earlier with international donor support. As a
result of the misprocurement incident, the
Parliament had created a government commission on
procurement in order to prevent a reoccurrence.
This action was first and foremost in the interest
of the GOM in order to prevent any new incidents,
she noted.

Prime Minister Greceanii's Response
--------------


11. (C) Prime Minister Greceanii assured the

CHISINAU 00000217 003.2 OF 003


Ambassador that the GOM would take action to
improve Moldova's position for the Compact
evaluation process. The Prime Minister expressed
disappointment that MCC funds were limited but
agreed that all the involved parties must make
common decisions on what should be funded. She
recognized that the GOM could not influence the
size of MCC's budget, but it could influence its
share of the Compact funds by taking steps to
improve its performance in the areas outlined by
the Ambassador. The Prime Minister noted that the
feasibility studies would be valuable regardless
of whether all the roads were funded by the
Compact. The GOM could, for example, use the
studies on unfunded roads to seek assistance from
other donors. The Prime Minister noted that the
signing in September would delay the beginning of
construction until 2010, since road rehabilitation
work could not be carried out in winter. This was
unfortunate since the project would not be able to
give a boost to the Moldovan economy during the
current global economic crisis. The Prime
Minister requested that the Ambassador look for
ways to complete the evaluation process early and
start the projects this year to offset the effects
of the economic crisis. The Prime Minister said
that the GOM was taking action in all these areas
and promised that she would instruct the
government to share all information on the CCECC
Civilian Board, TIP and the road rehabilitation
maintenance fund with the Ambassador.

Threshold Country Program Extension
--------------


12. (C) The Ambassador noted that the MCC
Threshold Country Program (TCP) ended on March 31,

2009. The Embassy had sent a letter to the Prime
Minister on February 19 requesting an extension.
The TCP implementers had not completed several
components and funding was available to finish the
programs. It would not look good, if the programs
were not completed successfully, the Ambassador
noted. The Prime Minister responded that she knew
the issue well and was personally responsible for
the delay in the signing of the extension. She
had ordered a review of all the components of the
TCP. Her staff had reviewed TCP and she was fully
satisfied with the review. She assured the
Ambassador that she would sign the extension later
in the day.

Comment
--------------


13. (C) Prime Minister Greceanii listened
carefully to the Ambassador's message in her
typical professional demeanor and displayed a
thorough command of the issues in her responses.
She spoke frankly with the Ambassador on the
issues that could potentially damage Moldova's
standing in the MCC evaluation process for a
Compact. We view her commitment to improving the
GOM's performance on the issues discussed in the
meeting as very sincere. She has been engaged in
the Compact proposal from the very beginning and
is personally committed to bringing it to a
successful conclusion and always reassures us that
the MCC Compact is a project close to her heart.
The Prime Minister attentively noted the
Ambassador's emphasis on the importance of
Moldova's performance and the direct impact the
GOM's actions would ultimately have on the size of
its Compact. And as promised the Prime Minister
did sign the TCP extension in less than an hour
after meeting with the Ambassador.

CHAUDHRY