KIKWETE TOUR D'HORIZON WITH CDA PART II: MCC AND OTHER

UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000106

SENSITIVE
SIPDIS

AF/E FOR JLIDDLE, INR/AA FOR FEHRENREICH

E.O. 12958: N/A
TAGS: EAID PGOV TZ
SUBJECT: KIKWETE TOUR D'HORIZON WITH CDA PART II: MCC AND OTHER
BILATERAL MATTERS

REF: A. 2008 Dar es Salaam 839, B. Dar es Salaam 71, C. Dar es
Salaam 66

DAR ES SAL 00000106 001.2 OF 002



1. (SBU) SUMMARY. At President Kikwete's request, on February 11
MCC Country Director briefed him on latest progress and obstacles in
Compact implementation. Kikwete displayed a keen interest and
awareness in Compact issues and offered assistance, both to provide
resources if necessary and to follow up with the Ministry of Finance
on tax-exemption issues. During the meeting, CDA raised other
issues of bilateral interest, including an ongoing tax dispute and
the upcoming naval ship visit. END SUMMARY.


2. (U) MCC Resident Country Director (RCD) told Kikwete that the
Compact was generally on track, but that the timeframe was tight.
2009 would be a year for finalizing designs, procurement and
contracting - necessary preliminary work. CDA stressed the
importance of implementing the Compact with high standards. MCC RCD
acknowledged that some deadlines have been missed and that
implementing partners, particularly Tanroads and Tanesco (the power
parastatal),were stretched thin.


3. (SBU) Kikwete said he understood the need for MCC to proceed
carefully, but also noted the complaints he received from MPs who
expected results in advance of the 2010 elections. He said that the
MPs would be satisfied if contracts were in place and mobilization
had begun by the end of 2009. After MCC RCD explained that the GOT
would be responsible for any cost overruns beyond the USD 698
million Compact, Kikwete said resources would be found if there were
a shortfall. He cited a Kiswahili saying to the effect that at
times one must cut the nose to heal the face (i.e., to take
necessary but difficult steps).


4. (SBU) On compensation and resettlement, MCC RCD noted MCC was
educating local authorities and the public. He said the Compact
called for compensation of those resettled even beyond the
requirements of Tanzanian law, in particular for people who were
settled on land without legal title. Kikwete said he shared this
view, insisting that the government "must have a human face" and
relating a personal story of a friend whose house was demolished
without compensation. Kikwete noted the issue of compensation in
Tanzania was based on a 1934 British ordinance and said the GOT was
seeking modalities to address the issue. Kikwete also related that
a friend in Tanga gave him a "thumbs up" on the progress of the road
in that region, where already some mosques had been demolished after
replacements were built.


5. (SBU) Kikwete said that when he was on Zanzibar, he told people,
"Our friends the Americans have come forward" to assist with the
energy situation. He said Zanzibaris only realized the urgency of
their problem when the current cable failed in mid-2008. He said
that the greater pressure came from Pemba, where power depends on
very old generators. (Note: Norway is placing a submarine power
cable from Tanga to Pemba - see ref a. End Note.)


6. (SBU) MCC RCD also raised a current potential delay in Compact
implementation, namely contractor concerns over tax exemptions.
Although the Compact is governed by the 1968 U.S.-Tanzania agreement
on assistance, individual contractors are skeptical that in practice
the Tanzania Revenue Authority will honor an international treaty.
Already one contractor has delayed signing a contract until the
Ministry of Finance issued a formal Government Notice explicitly
confirming that work under the Compact will be tax-exempt for that
contractor. MCC has proposed that the Ministry of Finance issue a
single set of comprehensive Government Notices that clearly describe
the tax exemptions already made legally available to all contractors
under the Compact. Kikwete said the proposal was a good idea and
promised to follow up.


7. (U) Turning to other matters, CDA expressed appreciation to
Kikwete for ordering a review of the tax dispute between APR Energy
and the GOT (ref b) and mentioned the interest of Senator Nelson in
the matter. CDA provided Kikwete with a final report of the Volcano
Disaster Assistance Project (VDAP) team that visited Tanzania in
January at Kikwete's request (ref c). CDA relayed that the VDAP
team had been impressed with their colleagues in the Geological
Survey of Tanzania and intended to maintain the links made during
the visit. CDA also alerted Kikwete to the upcoming visit of the USS
Bradley, which would provide opportunities for Civil Affairs
projects, training for the TPDF, and U.S. service members to
experience Tanzania.

DAR ES SAL 00000106 002.2 OF 002



ANDRE