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Viewing cable 08LILONGWE63, MILLENNIUM CHALLENGE CORPORATION (MCC) INITIAL

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Reference ID Created Released Classification Origin
08LILONGWE63 2008-01-29 14:47 2011-08-30 01:44 UNCLASSIFIED Embassy Lilongwe
VZCZCXRO4047
RR RUEHDT RUEHLMC RUEHMR RUEHPA RUEHPB
DE RUEHLG #0063/01 0291447
ZNR UUUUU ZZH
R 291447Z JAN 08
FM AMEMBASSY LILONGWE
TO RUEHC/SECSTATE WASHDC 5008
INFO RHEHNSC/NSC WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC
RUCNMCM/MCC COLLECTIVE
UNCLAS SECTION 01 OF 04 LILONGWE 000063 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON KMCA MCC PGOV PREL MI
SUBJECT: MILLENNIUM CHALLENGE CORPORATION (MCC) INITIAL 
VISIT TO MALAWI 
 
REF: 07 STATE 168510 
 
LILONGWE 00000063  001.2 OF 004 
 
 
1.  (U) SUMMARY:  A Millennium Challenge Corporation (MCC) 
team headed by VP John Hewko visited Malawi January 13-17 to 
initiate the compact development process following Malawi,s 
selection as compact eligible in 2007 (reftel).  The visit 
provided an opportunity to meet with a variety of 
stakeholders to explain the compact development process.  The 
MCC team met with President Mutharika, GOM cabinet officials, 
Parliamentary leaders, the two main opposition leaders, and 
representatives from civil society, NGOs, academia, the 
private sector and the international donor community.  MCC VP 
Hewko also gave interviews to a range of media.  The visit 
achieved its key objectives, publicizing the compact process 
and emphasizing for all stakeholders the importance of 
broad-based engagement in the MCC consultative process.  The 
GOM and the stakeholders in Malawi seemed to understand the 
message and appeared ready to move ahead, despite concerns 
that the process could become politicized as the country 
approaches national elections.  Hewko discussed with each 
group the importance of managing expectations for timing of 
Compact signing, especially in light of May 09 presidential 
elections.  The next step in the process is for the GOM to 
name a Point Of Contact (POC) in order to begin engaging with 
the MCC technical team.    End summary. 
 
2. (U) Millennium Challenge Corporation Vice President for 
Compact Development John Hewko, Director of Compact 
Development Jerry Dutkewych and Malawi Compact Development 
team member Valeria McFarren visited Malawi January 13-17. 
The visit, the first since Malawi was selected by MCC as a 
compact eligible country (reftel), provided an opportunity 
for MCC personnel to meet with a variety of stakeholders to 
explain the compact development process. 
 
MEETING WITH THE PRESIDENT 
-------------------------- 
 
3. (SBU) Despite some initial scheduling difficulties, the 
team ultimately held a warm and productive meeting with 
Malawian President Bingu wa Mutharika  Mutharika, accompanied 
by Finance Minister Goodall Gondwe and Presidential Advisor 
Dr. Peter Mutharika (the President's brother), impressed the 
team with his knowledge of MCC processes and recognition of 
what needed to be done to successfully conclude a compact. 
The President discussed his efforts to rebuild the public 
sector and to bring growth to the country since taking 
office.  Faulting international financial institutions for 
their emphasis on macroeconomic stability, he emphasized 
growth policies, but within a stable political environment 
with respect for human rights, rule of law, and free 
elections was also crucial.  Mutharika countered opposition 
claims that he has not upheld the rule of law by citing the 
number of anti-corruption cases brought by his government and 
emphasizing that there were no political prisoners or 
detainees under his administration.  Mutharika was insistent 
that aid programs do not succeed without Malawian ownership, 
and characterized an eventual MCC compact as an excellent 
opportunity to craft a Malawian program to benefit the 
country.  The president reviewed the six &priorities within 
priorities8 of the Malawi Growth and Development Strategy 
(MGDS) and welcomed the flexibility of the MCC program to 
further the MGDS.  Finance Minister Gondwe commented that 
Malawi was already well versed in consultative processes 
after using similar approaches to develop the MGDS and 
various poverty reduction strategy papers.  The president 
agreed that he would keep politics and elections out of the 
MCC process, saying he wanted to get the machinery in place 
quickly so it could not be derailed. 
 
BRIEFING THE CABINET 
-------------------- 
 
4. (U) Prior to the MCC visit, some strains within the GOM 
were already appearing, with the Ministry of Economic 
Planning and Development (which had had the lead on the MCC 
Threshold Program) expressing unhappiness with a lack of 
communication from the Ministry of Finance.  The meeting with 
Cabinet ministers succeeded in conveying the need for the 
compact development process to be broad-based and inclusive. 
There was still some skepticism from some ministers about the 
feasibility and necessity of the consultation process 
described.  Citing the MGDS, some felt that the GOM had 
already completed a review of its development needs.  Another 
minister argued the success achieved in Malawi through its 
fertilizer subsidy program and asked why MCC could not be 
used to support such a program.  Overall, however, the 
ministers seemed to understand the messages conveyed by Hewko 
and did not appear to be focused only on what MCC could do 
 
LILONGWE 00000063  002.2 OF 004 
 
 
for their ministry.  We are told that a subsequent Cabinet 
meeting chaired by the President overwhelmingly endorsed the 
MCC approach. 
 
OPPOSITION BASHES GOM 
--------------------- 
 
5. (SBU) In his meeting with the MCC team, opposition Malawi 
Congress Party (MCP) leader John Tembo questioned why Malawi 
was selected for compact eligibility, stating that the MCP 
didn,t believe the indicators.  Tembo cited the lack of 
local government elections, the prorogation of parliament, 
the stalemate on the electoral commission, and the long-time 
absence of an Anti-Corruption Board (ACB) director as areas 
where the current government acted unlawfully.  Regarding 
consultations, Tembo suggested that the village chief level 
was the most appropriate to get the broadest range of 
suggestions for programs but he advised avoiding the 
Traditional Authorities (T/As) since they were beholden to 
government due to their large raises this year.  Tembo was 
pleased to hear that an independent entity would be used to 
implement any compact despite a government majority on the 
board.  After hearing how the Gambia lost compact 
eligibility, the MCP was pleased that MCC could be used to 
&hold the government's feet to the fire.8  Finally, Tembo 
suggested that agriculture, social services, education, 
health, and transport were the most likely sectors to focus 
an MCC compact.  Despite being open to engage in the compact 
development process, he warned that the MCP remained 
unconvinced that the indicators were accurate, or that the 
process would really be broad-based, consultative, and 
apolitical with the current government in control. 
 
6.  (SBU) The MCC team also met with former President and 
leader of the opposition United Democratic Front (UDF) Baliki 
Muluzi and 10 other UDF members.  In many respects the UDF 
meeting echoed the MCP meeting.  Muluzi himself chose to stay 
above the fray, but the other UDF leaders present attacked 
the MCC indicators with examples of the current government,s 
shortcomings.  They cited GOM failure to control corruption, 
maintain rule of law, provide good governance, adequate 
education, health care, or economic growth for the nation. 
The Ambassador told the UDF that he hoped the UDF could get 
behind the MCC project and realize the potential benefit to 
the poor.  He also stressed the opportunity that MCC 
represented for Malawi - a grant with no strings attached 
that the nation itself could decide what to do with - and 
urged the UDF not to politicize it.  Overall, the UDF 
appeared the least willing to engage cooperatively in the 
compact process.  This meeting highlighted the likely 
difficulties in keeping the compact process apolitical, 
broadly consultative and quick.  The Ambassador will continue 
this dialogue with Muluzi and the UDF in the coming weeks. 
 
PARLIAMENT 
---------- 
 
7.  (U) The meeting with parliamentary leaders was very well 
attended, with most of the committee chairs (all from the 
opposition) present.  The members listened attentively to the 
MCC presentation and appeared eager to become engaged in the 
compact development process.  They thanked the MCC for the 
helpful support the Parliament had received under the MCC 
Threshold Program, and asked that the support continue during 
the compact phase.  The MCC team encouraged the group to 
request such support in their compact proposal.  MPs focused 
on the need for Malawi,s performance on indicators to remain 
satisfactory in order to access funding.  VP Hewko explained 
that under most circumstances, countries were given an 
opportunity to address performance slippage before funding 
was suspended.  In response to questioning, Hewko clarified 
that Malawi,s performance on indicators was compared to 
other peer countries, not an absolute assessment. It would 
also be essential to maintain progress on the implementation 
of the MCC-funded projects themselves, he added. Opposition 
MPs suggested that opposition leaders participate in the 
board of Malawi,s eventual compact implementing entity. 
 
CIVIL SOCIETY AND THE PRIVATE SECTOR 
------------------------------------ 
 
8. (U) Similarly, the meetings with civil society and the 
private sector were well attended (despite some last minute 
schedule changes).  Several participants expressed interest 
in providing input into the process.  Private sector business 
leaders in particular appeared eager to highlight current 
constraints to investment in Malawi, such as costs of 
transportation and power. 
 
 
LILONGWE 00000063  003.2 OF 004 
 
 
ACADEMICS 
--------- 
 
9. (U) The MCC team met over lunch with a group of senior 
University of Malawi officials.  The group included 
representatives from the economic, law, and political science 
faculties.  The MCC team had a chance to engage some of the 
people who could prove to be valuable resources for Malawi in 
its compact development.  Notably, Dr. Winford Masanjala, 
Head of the Economics Department, observed that all of the 
economists with advanced degrees in Malawi are in academia, 
not government, a statement that is not entirely true. 
 
SMALL DINNERS WITH PROMINENT LEADERS 
------------------------------------ 
 
10. (U) The MCC team was able to meet in a more relaxed 
setting with prominent political, business and media leaders 
in a series of three dinners held during the visit.  In 
addition to allowing the team to impress several influential 
figures in Malawi with the important points of the MCC 
process, these dinners also provided a unique opportunity for 
the team to receive candid feedback about the political and 
economic dynamics in Malawi.  Former vice-president Justin 
Malawezi recalled several past efforts to consult the general 
public on development priorities, including the UNDP-funded 
&Malawi Vision 20/208 exercise conducted in the 
mid-1990,s.  He urged that the MCC build on, rather than 
simply ignore, such past efforts.  Hewko expressed the 
importance of de-politicizing the MCC process which includes 
the appointment of a full-time POC that transcends political 
parties, has the support of the government and works well 
with the private sector and civil society.  In response, 
these leaders recommended a couple of POC candidates that fit 
this criteria. 
 
MEDIA 
----- 
 
11.  (U) The Embassy Public Affair Section developed a robust 
program to allow the MCC team to get their message to the 
media.  Interviews were held with television, radio, and 
Malawi,s two largest newspapers, and a press conference was 
also held, reaching a yet wider group of media outlets.  The 
team,s dinner with press editors provided another 
opportunity to stress the importance of accurate and unbiased 
reporting to the compact development process. 
 
12.  (U) The visit received very positive media coverage. 
Interviews with VP Hewko were carried as full page stories in 
leading newspapers as well as on Malawi,s leading television 
news program. 
 
DEVELOPMENT PROJECT VISIT 
------------------------- 
 
13.  (U) The MCC team was able to make a site visit to a 
small scale development project in rural Malawi.  This 
project, funded through USAID and PL-480, includes 
irrigation, micro-finance, health and nutrition, and 
institutional strengthening elements.  The visit provided an 
impressive illustration of the potential grass roots impact 
that MCC assistance could bring. 
 
MAIN THEMES 
----------- 
 
14.  (U) Despite some scheduling difficulties, especially 
regarding the meeting with Mutharika, the MCC team was 
generally received very well.  All sectors of society and 
government in Malawi seem eager to seize the opportunity 
represented by MCC.  On the whole, the team achieved its 
objectives of informing Malawi,s stakeholders how the 
compact development process will work, and in particular the 
need for broad-based consultations.  Key contacts 
acknowledged the importance of selecting an able and 
respected individual to lead Malawi,s compact development 
process. 
 
15.  (U) Overall the GOM and other stakeholders seemed to 
understand the MCC message, although not without reservations 
and exceptions in some quarters.  There is clearly a danger 
of the process becoming politicized, especially with national 
elections scheduled for 2009.  The UDF seemed particularly 
reluctant to engage in a spirit of cooperation.  There was 
also concern that a possible change of government could 
interrupt compact negotiations. 
 
16.  (U) One recurring theme from several of the meetings was 
 
LILONGWE 00000063  004.2 OF 004 
 
 
a clear desire to streamline the consultation process. 
Several interlocutors noted that Malawi has engaged in 
multiple such processes in the past and suggested that it 
would be a duplication of effort to start over again from 
square one. 
EASTHAM