VZCZCXRO5298
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1445/01 3401307
ZNR UUUUU ZZH
R 061307Z DEC 07
FM AMEMBASSY MAPUTO
TO RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHC/SECSTATE WASHDC 8301
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0092

UNCLAS SECTION 01 OF 02 MAPUTO 001445 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON PGOV PREL MZ
SUBJECT: MCC CEO DANILOVICH SEES CAPACITY CHALLENGES 
FIRSTHAND 
 
MAPUTO 00001445  001.2 OF 002 
 
 
¶1.  SUMMARY: Ambassador John Danilovich, CEO of the 
Millennium Challenge Corporation (MCC), met with Mozambican 
President Armando Guebuza, international donors and private 
sector representatives, gave a speech on U.S. development 
assistance at a local university, and visited MCC project 
sites on November 17-20.  Indicative of the challenges of 
assistance programs in Mozambique, a recurring theme in 
meetings was the challenge of developing local capacity to 
implement and participate in the MCC Compact.  END SUMMARY. 
 
¶2.  From November 17-19, Ambassador Danilovich visited 
Mozambique's Northern provinces.  Stops included proposed MCC 
roads, agriculture and water sanitation projects in Pemba, 
Nampula, and Nacala.  The Ambassador also met with key 
counterparts including provincial governors, city mayors, and 
local business and religious leaders. 
 
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Guebueza: I'm responsible for GRM proposal to MCC 
--------------------------------------------- ---- 
 
¶3.  In a courtesy call November 20th, President Guebuza 
thanked Ambassador Danilovich for USG support to Mozambique. 
Guebuza indicated that the GRM's proposal to the MCC for 
funding reflected his personal input*&this MCC plan is my 
plan,8 he said.  The President expressed interest in 
learning more about other MCC agreements signed in 
sub-Saharan Africa, especially Sao Tome and Principe.  He 
noted that international and U.S. investment is increasing. 
Referring to the GRM purchase of the Cahora Bassa 
hydroelectric dam from Portugal with commercial financing, he 
declared the act &a second day of independence for the 
country.8  Ambassador Danilovich responded that many 
international companies include MCC indicators and the 
signing of a Compact as part of their risk analysis before 
investing in a country.  The Ambassador pressed for continued 
GRM focus on Compact implementation, and to finalize the 
MCC's tax agreement and to engage qualified local MCA staff. 
In a subsequent meeting with the MCA Board of Directors that 
included the Ministers of Planning and Development, 
Agriculture, and State Administration, he reiterated the 
importance of timely Compact implementation. 
 
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Private Sector Competitiveness Concerns 
--------------------------------------- 
 
¶4.  Private sector representatives from the U.S.-Mozambique 
Chamber of Commerce (CCMUSA) and the Confederation of 
Economic Associations of Mozambique (CTA) told Ambassador 
Danilovich that many Mozambican companies don't yet have the 
technical capacity and expertise to successfully compete for 
many of the projects contemplated by MCC, and pressed for MCC 
to use Compact funds for capacity building.  Representatives 
also shared a common concern that domestic financing 
obstacles make it very difficult for the private-sector in 
Mozambique to compete with foreign companies with better 
access to international credit, pointing to many existing 
examples of large-scale projects in Mozambique contracted out 
to foreign companies, especially from South Africa. 
Participants also expressed concern about Chinese companies 
outcompeting local businesses.  Pointing to a similar World 
Bank strategy, representatives suggested that large MCC 
contracts be broken into smaller components, which would help 
local compete. 
 
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International Donors Urge for Closer Coordination 
--------------------------------------------- ---- 
 
¶5.  Ambassadors and heads of cooperation from more than 20 
diplomatic and international missions had a roundtable 
discussion with Ambassador Danilovich, the Charge, USAID 
Director and MCC acting country director.  The IMF resident 
representative expressed concern about MCC's tax exemptions. 
The Norwegian representative noted that most other donors are 
providing direct budget support, while the USG through the 
MCC does not.  The French and Dutch Ambassadors urged for 
more MCC coordination with other donors to minimize overlap 
and ensure efficient use of the GRM's limited capacity. 
Ambassador Danilovich pointed to the U.S. legal requirements 
which prevent the MCC from paying local taxes.  He assured 
participants that coordination efforts are ongoing, noting 
many joint efforts between the USG and other donors already 
existed in other countries and were being developed in 
Mozambique, including with the World Bank, the United 
Kingdom, and France.  The Charge emphasized that while the 
USG doesn't provide direct budget support bilaterally, USG 
contributions to international organizations that do provide 
direct support in Mozambique are significant. 
 
MAPUTO 00001445  002.2 OF 002 
 
 
 
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Policy Speech: U.S. Committed to Africa 
--------------------------------------- 
 
¶6.  In a presentation at Maputo's Polytechnic University, 
Ambassador Danilovich reviewed the depth of the USG's 
commitment to Africa, including the President's Emergency 
Plan for AIDS Relief (PEPFAR), the President's Malaria 
Initiative (PMI), and assistance through USAID and MCC.  In 
an extended question and answer period following, there were 
many requests for additional information on the specifics of 
procurement and bidding processes for the MCC Compact, and 
opportunities for training and capacity building. 
 
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Comment: Capacity, Implementation Top Challenges 
--------------------------------------------- --- 
 
¶7.  Ambassador Danilovich's visit underscored USG commitment 
to Mozambique's development and furthered understanding of 
the MCC program by other donors and Mozambican  stakeholders. 
 In each venue, participants highlighted the importance of 
developing additional human capacity to implement programs in 
Mozambique.  The private sector and government have limited 
qualified personnel, and supporting systems and 
infrastructure are sometimes still nascent and untested. 
President Guebuza's personal commitment to MCC Compact 
implementation, reiterated again at a private sector 
conference November 28, will be vital for implementation and 
keeping the Compact on schedule. 
Chapman