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DE RUEHUM #0671/01 2510740
ZNR UUUUU ZZH
P 080740Z SEP 06
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC PRIORITY 0330
INFO RUEHBJ/AMEMBASSY BEIJING 5225
RUEHUL/AMEMBASSY SEOUL 2447
RUEKJCS/SECDEF WASHDC

UNCLAS ULAANBAATAR 000671 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM, EAP/PD, L FOR STEVE MARCHESE-PLEASE PASS TO ROB 
BLAIR OF HAC 
 
E.O. 12958: N/A 
TAGS: PREL OREP PGOV MARR EAID KMCA KPAO MG
SUBJECT: Codel Kolbe Advances U.S. Interests 
 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION. 
 
¶1. (U) SUMMARY: During a September 1-3 visit, Codel Kolbe examined 
U.S. assistance programs in Mongolia, with a particular focus on the 
proposed Millennium Challenge Account (MCA) program.  The Codel 
stressed that qualifying for MCA is not enough, and that Mongolia 
will need to take the time and effort to put together a good 
proposal.  They urged enhanced anti-corruption efforts.  In meetings 
with Mongolia's senior leaders, they also urged that Mongolia's 7th 
rotation of troops to Iraq be consistent with the size of the 
current rotation.  END SUMMARY. 
 
Meetings with Political Leadership 
---------------------------------- 
 
2.(SBU) Chairman Kolbe, Rep. Baird and Rep. Crenshaw met separately 
with President Enkhbayar, Speaker Nyamdorj, and Prime Minister 
Enkhbold.  The Codel also was briefed on USAID projects, and had 
meetings with U.S. businessmen and Peace Corps volunteers. 
 
¶3. (SBU) MCA:  In all three meetings with Mongolia's political 
leadership, the Mongolians expressed disappointment that "after 
three years, Mongolia still has not received MCA funding."  Chairman 
Kolbe praised Mongolia for remaining eligible for funding for three 
consecutive years and explained that being eligible does not mean 
that funding will automatically follow.  He emphasized that every 
country must re-qualify every year by performing above the median on 
a series of tough, objective criteria.  The criteria were selected 
after careful study of available international surveys and, while 
not perfect, were the best available.  He explained that funding is 
not automatic:  eligible countries must submit and negotiate a 
proposal that will satisfy the MCC, the U.S. Congress -- and 
ultimately the American taxpayer.  MCA is unique in its goal and 
procedures; it is intended to be transformational.  In Mongolia's 
case, Mongolia did not submit a proposal until October 2005 and the 
proposal is complex and requires considerable refinement during the 
due diligence phase.  The proposed projects must reduce poverty and 
be financially sustainable.  He recognized that lack of capacity on 
the Mongolian side is a problem, but noted that negotiating a 
compact takes time.  It is better to do it right than do it quickly. 
 He encouraged Mongolia to invest in its proposal and promised to 
discuss with MCC CEO Danilovich how to ensure that sufficient 
resources have been devoted to enabling Mongolia to refine its 
proposal.  Representative Baird observed that many Americans 
question the wisdom and utility of U.S. foreign aid programs in 
general.  In order to defend MCA to domestic critics, the USG must 
be able to demonstrate that the money is being used wisely and is 
not corrupted or diverted. 
 
¶4. (SBU) FTA:  In all three meetings, the Mongolian interlocutors 
urged that U.S. to conclude a Free Trade Agreement (FTA) with 
Mongolia and noted with satisfaction parallel non-binding "sense of 
congress" resolutions being developed in both the House and the 
Senate, urging the Administration to enter into an FTA with 
Mongolia.  Chairman Kolbe noted that as an "ardent free trader" he 
generally supports FTAs, but only the President can negotiate these. 
 In the case of Mongolia, the U.S. reluctance to proceed stems not 
just from the fact that the two-way trade volume is small and there 
are other, higher country priorities.  It also stems from the fact 
that Mongolia has to do its homework.  Representative Baird noted 
that certain benchmarks (laws and regimes) must first be in place 
before the U.S. Congress will approve an FTA:  e.g., protection for 
labor; protection for the environment, and IPR protection. 
 
¶5. (SBU) OIF:  In all his meetings, Chairman Kolbe urged Mongolian 
decision-makers to remain committed to Operation Iraqi Freedom (OIF) 
and to send a 7th rotation that is equal in number to the current 
deployment.  He underscored that Mongolia's participation is more 
than just symbolic; Mongolian peacekeepers perform a vital, 
strategic role in protecting the Polish Command headquarters at Camp 
Echo.  He noted that he had met with Mongolian veterans of OIF and 
was impressed with the enthusiasm and pride they conveyed. 
 
Anti-corruption 
--------------- 
 
¶6. (SBU) President Enkhbayar raised the issue of corruption of 
Mongolia and the need to fight it.  He noted that the first-ever 
anti-corruption law had been passed in July.  But, he said, passing 
the law was the easy part; effective implementation will be the 
challenge.  He stated that in order to fight corruption, other laws 
need to be amended as well, beginning with civil service reform. 
"The civil service today is a political patronage system.  Ministers 
hire their friends and family.  They are serving not the interests 
of the nation, but their own private interests."   The first step 
will be to take politics out of the civil service by requiring all 
civil servants to be apolitical and renounce political party 
membership.  Enkhbayar also noted with some irony that the 
MPRP-proposed windfall profit tax on gold is resulting in 
corruption:  gold miners are either hoarding or smuggling the gold 
out of the country to avoid the tax, with the result that the 
central bank (Bank of Mongolia) is concerned about the precipitous 
drop in the amount of gold being sold to the bank. 
 
¶7. (U) The Ambassador hosted a luncheon with four Members of 
Parliament, including Munh-Orgil (MPRP and head of Legal Standing 
Committee), Idevhten (MPRP Caucus leader), Dondog (MPRP and head of 
State Structure Standing Committee), and Gonchigdorj (Democratic 
Party and head of the Foreign Affairs and Defense Standing 
Committee).  Discussions focused on the ongoing Millennium Challenge 
Account (MCA) negotiations and the lack of progress to reach a final 
agreement on a compact.  Munh-Orgil engaged in a particularly frank 
discussion with the Codel on his frustration with what he sees as 
the United States' "preoccupation with corruption."  He agreed that 
politicization of the civil service is a problem which helps produce 
corruption, but said that low salaries also are a key factor.  The 
Codel responded that the GOM needs to combat corruption in a 
systematic way before an MCA compact can be reached and reiterated 
the U.S. position that due to the unique nature of the MCA that both 
sides need to work closely together to agree on a final package. 
 
Review of Mongolia's MCA Proposal 
--------------------------------- 
 
¶8. (SBU) Codel Kolbe discussed the Mongolian MCA proposals in detail 
with key officials of the Mongolian MCA National Council, including 
State Secretary for Finance Khurelbaatar, MCA National Council 
Secretary General Enkhtuya, and representatives for the Mongolian 
 
SIPDIS 
working groups on health, vocational education, information 
technology, and railroad projects.  The Codel visited two potential 
MCA project sites: the diagnostic center at the National Cancer 
Center and a vocational school. 
 
Peacekeeping 
------------ 
 
¶9. (U) The Codel met with LTG Togoo, Chief of Staff of the Mongolian 
Armed Forces.  The meeting focused on FMF and IMET while LTG Togoo 
spoke on Mongolian Armed Forces (MAF) peacekeeping capabilities and 
goals.  Togoo stressed how money from the Global Peace Operations 
Support Initiative (GPOI) plays a big part in preparing the MAF to 
participate in UN missions and hope GPOI funding will not decrease 
in the future.  LTG Togoo cited the recent GPOI-supported 
peacekeeping exercise, Khaan Quest 2006, as a noteworthy success 
story.  The Codel also met with 20 Mongolian soldiers who had 
deployed to OIF, OEF, Kosovo, or Sierra Leone.  When the CODEL asked 
the soldiers if they volunteered for these missions, all answered 
affirmatively and emphasized that their deployments "provided a good 
training opportunity." 
 
 
Public Diplomacy 
---------------- 
 
¶10. (U) Eagle TV, the top-rated TV news source in Mongolia, 
interviewed Chairman Kolbe and ran the 30-minute interview in its 
entirety and rebroadcast it several times on Sunday, September 3. 
Rep. Kolbe discussed the MCA process, and thanked Mongolia for its 
contributions in Iraq and Afghanistan, highlighting how these 
contributions serve Mongolia's national interests.  In addition, 
Chairman Kolbe answered questions on U.S. visas and the immigration 
reform debate. 
 
¶11.  (U) The Codel did not have an opportunity to clear this cable 
before departing. 
 
Goldbeck