VZCZCXRO1025
PP RUEHMA RUEHPA
DE RUEHDK #1530/01 2051516
ZNR UUUUU ZZH
P 241516Z JUL 07
FM AMEMBASSY DAKAR
TO RUEHC/SECSTATE WASHDC PRIORITY 8847
RUEHLMC/MCC WASHDC
RUEHZK/ECOWAS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 DAKAR 001530 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR AF/EPS AND AF/W 
 
E.O.12958 
TAGS: EAID KMCA PREL ECON SG
SUBJECT:  SENEGAL APPEARS READY TO GIVE-UP ON MCC OPPORTUNITY 
 
REF:  A) DAKAR 1508, B) DAKAR 1276 
 
DAKAR 00001530  001.2 OF 002 
 
 
¶1.  (U) This cable includes an action request for MCC with 
coordination by the Department.  Please see para 5 below. 
 
¶2.  (SBU) Summary:  Senegal's Minister of Finance Abdoulaye Diop 
confirmed that Senegal insists on terms likely unacceptable to the 
Millennium Challenge Corporation (MCC) for financing Senegal's toll 
road.  Diop requested a letter from the USG that reviews MCC's and 
Post's understanding of the GOS current position, and that 
reiterates MCC's inability to accept the GOS stated terms.  These 
terms include immediate evaluation and acceptance of a 
pre-established private participant in the toll road project.  The 
Minister asked that a letter further specify that by imposing these 
terms on MCC, the GOS may lose this second opportunity to achieve a 
compact.  The French Development Agency's insistence on its timeline 
for a smaller loan to help with the road is also a factor in the GOS 
calculation.  It is perhaps time to accept that the MCC concept is 
not a good fit for this Senegalese Administration.  End summary. 
 
GOS PREPARED TO TURN DOWN MCC MONEY 
----------------------------------- 
¶3.  (SBU) Only five weeks ago the GOS agreed that the Millennium 
Challenge Corporation (MCC) should stop work on an approximate USD 
500 million proposal to fund the Diamniadio Industrial Platform 
because Senegal had signed an agreement with Dubai-based Jafza 
international for a competing project (Ref B).  On July 18 Senegal's 
Minister of Finance, apparently under instructions, told MCC reps 
that if MCC approval for its participation in funding Senegal's new 
toll road is not, in effect, confirmed by early October, then 
Senegal would look for other donors for the project.  The decision 
to put at risk an estimated USD 300 million in grant money was 
apparently precipitated, in part, by the claim by the French 
Development Agency (AFD) that if it could not be assured of signing 
an agreement for its approximate USD 30 million loan for the project 
by December, it would likely withdraw its pledge. 
 
¶4.  (SBU) On July 19, Minister Diop confirmed this situation with 
the Charge and MCC reps.  Another factor is the apparent insistence 
by the GOS and perhaps the World Bank (which is proposing a loan of 
about USD 40 million to support ancillary projects for the toll 
road) to continue unhindered with the concessioning of a 
Build-Operate-Transfer tender, even though the MCC has explained 
that it would likely be a deal breaker.  Senegal's investment 
promotion agency, APIX, is in charge of the toll road project, 
including the process to select the private participant.  There are 
persistent rumors that APIX is in dire need of a quick infusion of 
cash to continue construction of the first, non-toll phase of the 
road, which the GOS has pledged to complete. 
 
ACTION REQUEST FOR LETTER 
------------------------- 
¶5.  (U) Minister Diop requested a letter from the USG confirming 
that MCC would be unlikely to meet the conditions he laid out, which 
would effectively end MCC's possible participation in the toll road 
project.  Such a letter would help the highest officials of the 
government verify the consequences of this course of action and, in 
all likelihood, stop further consideration of MCC's participation. 
Post requests that MCC, in coordination with the Department, provide 
such a letter, or draft language for such a letter to be sent under 
Charge's signature. 
 
WHAT'S NEXT? 
------------ 
¶6.  (SBU) Minister Diop asked whether Senegal could still benefit 
from MCC financing for another, unspecified project.  MCC verified 
that as long as Senegal remains compact-eligible by meeting MCC's 
eligibility criteria the country could submit a new compact 
proposal.  Charge underscored that timing, due to Congressional 
budget allocations, could be a limiting factor and that the MCC 
process will always be robust in terms of evaluation and due 
diligence before a compact could be signed.  While President Wade 
has frequently suggested that the MCC fund a major new power plant, 
we have, on a number of occasions, explained that this would not be 
a simple, swift, or sure undertaking. 
 
COMMENT:  WHAT IS GOING ON? 
--------------------------- 
¶7.  (SBU) It is difficult to understand the GOS's apparent 
willingness to give up on MCC benefits.  Minister Diop acknowledged 
that the government was feeling the heat from the public reaction to 
the ending of the Diamniadio Platform project (Ref A).  At this 
point, we believe that President Wade understands that Senegal is at 
risk of losing any opportunity for an MCC compact.  It is clear that 
the decision to give up on the Diamniadio platform and now the toll 
road funding are being made by those closest to Wade and, we assume, 
with his blessing.  We need to again assure that the Senegalese 
public understands rightly it is GOS intransigence that is to blame 
 
DAKAR 00001530  002.2 OF 002 
 
 
for this missed opportunity, and not a lack of effort or good will 
by MCC or Embassy. 
 
¶8.  (SBU) To understand the reasons why the GOS would give up USD 
300 million in grants in favor of USD 70 million in loans, one must 
know the answer to some key questions: 
 
-- Why is AFD insisting on a December deadline, even though its 
money will not directly impact the construction?  We assume this 
push is tied to the July 26 visit of French President Sarkozy and 
related efforts to boost Franco-Senegal ties; 
 
-- What has already been put in motion for the BOT concession?  We 
assume there must be a deal already in motion to keep money flowing 
to APIX in the near term, although the terms of reference are not 
known; 
 
-- Are there other donors ready to step in to finance the toll road? 
 It's possible, given our assumption that the Bin Laden Group's 
contract to build a new airport, Dubai Port World's agreement to 
take over the container operation and more at Dakar's port, and 
Jafza's deal for creating one or more Special Economic Zones all 
must have been inked with the understanding that Senegal would move 
forward on the road in order for each of their projects to be 
profitable. 
 
¶9.  (SBU)  It is perhaps time to consider that the MCC concept may 
not be a good fit for the Wade Administration, which puts priority 
on negotiation, deal-making, and offering special exemptions, 
exonerations, and other considerations in exchange for quick work 
and secrecy as opposed to the MCC requirements for accountability, 
transparency, and due diligence. 
 
¶10.  (U) Visit Embassy Dakar's Intranet site at: 
http://dakar.state.gov/htdocs/section/econSec tion.aspx and Embassy 
Dakar's SIPRNET Web site at http://www.state.sgov.gov/p/af/dakar 
 
SMITH