VZCZCXRO4164
RR RUEHLMC
DE RUEHUM #0499/01 1800145
ZNR UUUUU ZZH
R 290145Z JUN 06
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTAQ^A6GWQQ(EOUL 2319
RUEHBJ/AMEMBASSY BEIJING 5083
RUEHKO/AMEMBASSY TOKYO 2145
RUEHMO/AMEMBASSY MOSCOW 1534
RUEATRS/DEPT OF TREASURY WASHDC
RUCPODC/USDOC WASHDC 1060
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC 0301

UNCLAS SECTION 01 OF 03 ULAANBAATAR 000499 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS USTR FOR WINELAND 
DEPT OF COMMERCE FOR ZHEN GONG CROSS 
 
E.O. 12958: N/A 
TAGS: EINV PREL EAID PGOV MG
SUBJECT: MCC EURASIA DIRECTOR REID'S MEETINGS WITH 
MONOGLIAN LEADERSHIP 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET 
DISTRIBUTION. 
 
¶1. (SBU) SUMMARY: Millennium Challenge Corporation 
Eurasia Managing Director Frances Reid met with 
Mongolia's President, Prime Minister, Speaker, and Vice 
Foreign Minister, among others, during the course of 
her June 12-22 visit to Mongolia.  During her meetings, 
she expressed appreciation for the hard work done by 
Mongolia's MCC National Council and Working Groups, 
noted her visit was designed to hone and refine 
Mongolia's five project proposals, and flagged the need 
for specialized expertise to advance this process 
including identifying time and cost trade-offs for the 
GOM's consideration.  She told her GOM interlocutors 
that, given the work remaining, a compact signing was 
unlikely this calendar year but perhaps possible in 
early 2007.  In separate meetings, the President sought 
housing solutions to preclude poor ger districts from 
becoming permanent.  The Prime Minister promised "some 
money" to pay for needed expertise, the Speaker said 
needed anti-corruption legislation would soon be 
passed, and the Vice Foreign Minister sought details on 
compact signing date prospects.  Reid told the 
Ambassador that her visit had made considerable 
progress in bringing specificity to Mongolia's 
proposals yet much remained to be done before a compact 
could be signed.  END SUMMARY. 
 
INTRODUCTION AND VISIT BACKGROUND 
--------------------------------- 
 
¶2. (SBU) MCC Eurasia Managing Director Frances Reid, 
accompanied by MCC Mongolia Director James Hallmark, 
visited Mongolia June 12-22 to assist Mongolia's MCC 
National Council in defining and refining its MCC 
compact proposal projects, as part of MCC's due 
diligence phase.  Over the course of their visit, they 
met extensively with the MCC National Council (NC) and 
the NC's project working groups (WKG) as well as 
relevant Ministry and Government of Mongolia (GOM) 
officials, including from the Ministries of Finance, 
Foreign Affairs, Health, Urban Development and 
Construction,  and Education, Culture, and Science as 
well as the Information and Communications Technology 
Authority and the Mongolian Railroad Authority.  This 
cable summarizes highlights of her meetings, 
accompanied by Mongolia Director Hallmark and DCM, with 
the President, Prime Minister, Speaker of the State 
Great Hural (parliament), and Vice Foreign Minister. 
 
REID'S COMMON THEMES: MAKING PROGRESS, NEED TO REFINE 
AND DEFINE, HIRE EXPERTS, COMPACT MAYBE NEXT YEAR 
--------------------------------------------- -------- 
 
¶3. (SBU)  In her meetings described below, Reid made 
essentially the same or similar points, including: 
 
-- Acknowledging the many unique challenges Mongolia's 
complex situation and projects must address; 
 
-- Reviewing the purpose of her trip, that being to 
achieve clarity, definition, and specificity in 
Mongolia's five project areas (low income community 
development (formerly known as ger area development," 
health, vocational education, an information and 
communication technology (ICT), and railroads): 
 
-- Expressing appreciation for the hard work done by 
Mongolia's MCC NC and WKGs; 
 
-- Flagging the need for specialized expertise (whether 
Mongolian or expatriate) to advance project definition; 
 
-- Emphasizing that the goal was to present clear 
options for the GOM to make decisions; 
 
-- Noting Mongolia's parliament was currently 
considering legislation directed at the problem of 
corruption; and, 
 
ULAANBAATA 00000499  002 OF 003 
 
 
 
-- Highlighting that, given the work remaining 
requiring special expertise, it appeared unlikely that 
a compact could be signed this calendar year, but that 
MCC hoped to do so early in 2007. 
 
PM ENKHBOLD NOTES PUBLIC FRUSTRATED BY DELAYS; 
COMMITS "SOME MONEY" TO OBTAINING NEEDED EXPERTISE 
--------------------------------------------- ----- 
 
¶3. (SBU) During her June 14 call on Prime Minister 
Enkhbold, the PM began by reviewing recent trends in 
the bilateral relationship, including the November 2005 
visit by President Bush.  He underscored the importance 
of Mongolia's MCC proposals as part of Mongolia's 
continuing economic and political transformation. 
Enkhbold noted that delays in concluding a compact had 
led to some frustration as well as lower expectations 
and confidence.  He stated that the GOM had indicated 
the GOM itself could devote "some money" to developing 
the projects to achieve a compact. 
 
VFM INTERESTED IN COMPACT SIGNING TIMING 
---------------------------------------- 
 
¶4. (SBU) On June 15, Vice Foreign Minister Tsolmon 
sought from Reid specifics on how much money would be 
required to fund needed experts and how much time the 
experts would require before a compact could be signed. 
Reid replied that it was too soon to know in both cases 
as the projects themselves have not yet been narrowed 
to the point where reasonable estimates could be made 
that would enable the GOM to make informed decisions 
which would necessarily need to consider the balance 
between time and costs. Reid reviewed with the VFM the 
status and prospects of the five project proposals. 
The two had an extended exchange concerning the 
viability of a second, additional rail line in the 
absence of Russian concurrence and cooperation vis a 
vis the existing joint Mongolian-Russian rail venture, 
with the VFM again intimating the GOM may seek to "go 
it alone" without Russian assent. 
 
SPEAKER: PARLIAMENT WILL PASS NEEDED ANTI-CORRUPTION 
LEGISLATION; SLOW MENTAL ADJUSTMENT TO MARKETS 
--------------------------------------------- ------- 
 
¶5. (SBU) During her June 15 meeting with State Great 
Hural (parliament) Speaker Nyambdorj, the Speaker 
stressed that the SGH would soon pass two pieces of 
legislation of interest to the USG, those being anti- 
corruption and anti-money-laundering legislation, prior 
to the SGH's recess in early July.  The Speaker 
reviewed Mongolia's accomplishments during the past 16 
years following the peaceful transition from communism 
and Soviet domination as well as Mongolia's unfinished 
tasks, including increasing employment and economic 
development.  While much of Mongolia's economy had 
transferred from the state to private control, the 
Speaker asserted, private sector-led growth had yet to 
be fully embraced or energized.  Corruption remains a 
problem, the Speaker admitted, saying corruption was, 
in part, an off-shoot of the rapid shift toward 
capitalism - everyone wants to get wealthy and the 
opportunities to do so - legally or illegally -- had 
grown significantly.  Nyambdorj acknowledged the 
importance of vocational education in terms of 
producing an employable labor force.  He also 
underscored that the GOM and the ruling political 
parties had not fully adjusted to the consultative 
process as well as the new, expanded role of the 
private sector, but it was endeavoring to learn quickly 
and make the shift in that direction. 
 
PRESIDENT HOPES GER DISTRICTS ONLY A TEMPORARY 
PHENOMENON; SEEKS HOUSING SOLUTIONS 
--------------------------------------------- -- 
 
¶6. (SBU) On June 20, President Enkhbayar was also 
interested in MCC's compact timetable and he listened 
 
ULAANBAATA 00000499  003 OF 003 
 
 
attentively to Reid's review of the project proposals. 
He was particularly interested in housing finance and 
mortgage proposals and stressed that Mongolia's long- 
term goal was to produce more housing so that ger 
districts would not become long-term permanent fixtures 
on UB's horizon.  (Note:  This dovetails well with his 
party's unfunded proposal to build 40,000 apartments.) 
He also hoped for increased job creation, perhaps with 
greater emphasis on small and medium enterprises as 
well as micro-finance.  Having just returned from the 
Shanghai Cooperation Organization meeting in Shanghai, 
where he met with Russian President Putin and Chinese 
President Hu Jin Tao, Enkhbayar signaled increased 
Russian rail-sector cooperation was unlikely, 
emphasizing the need to press ahead with a Mongolian- 
owned second rail.  The President was also interested 
in prospects for a second compact. 
 
¶7. (U) MCC Eurasia Managing Director Reid cleared this 
message. 
 
GOLDBECK