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