VZCZCXRO3922
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLG #0253/01 1231016
ZNR UUUUU ZZH
R 021016Z MAY 08
FM AMEMBASSY LILONGWE
TO RUEHC/SECSTATE WASHDC 5223
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS SECTION 01 OF 02 LILONGWE 000253 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL CH MI
SUBJECT: MALAWI - CHINA'S ENGAGEMENT IN AFRICA 
 
¶1. (SBU) Summary: Per reftel request, the following information is 
provided for preparation of U.S.-China policy dialogues.  China and 
Malawi established formal diplomatic relations a mere four months 
ago and engagement between the U.S. and Chinese Missions has so far 
been limited.  China has already taken over many commitments 
previously funded by Taiwan through an announced $259 million USD 
aid package, composed of a mixture of grant and "soft credits." 
Among the focus areas are the construction of the Karonga-Chitipa 
road and a new parliament building, funding for defense cooperation, 
and school construction. Potential areas of Sino-U.S.cooperation and 
coordination in Malawi are defense equipment and training, health 
care system strengthening, agriculture, and infrastructure 
development.  End Summary. 
 
Focus Areas of Chinese Engagement 
--------------------------------- 
 
¶2. (U) China and Malawi signed a memorandum of understanding 
establishing formal diplomatic relations on December 28, 2007.  The 
signing ended 42 years of Malawian relations with Taiwan.  As part 
of the agreement, China agreed to take over funding many, but not 
all, of the activities that Taiwan previously supported.  In March 
2008, President Mutharika made a state visit to China and officially 
opened Malawi's embassy in Beijing.  Upon his return, he detailed a 
$259 million USD aid agreement that was signed during his trip. 
 
¶3. (U) The $259 million USD addresses four main focus areas: 
 
- $80 million USD for construction of the Karonga to Chitipa road in 
northern Malawi and completion of construction of the Parliament 
building in Malawi. 
 
- $3 million USD for defense and security cooperation. 
 
- $1.4 million USD for construction of two rural schools under the 
Africa/China Forum program. 
 
- $175 million USD for concessionary loans over a five-year period 
for other priority projects. 
 
Additionally, China has offered 12 scholarships to Malawian students 
to study at Chinese universities. 
 
¶4. (U) The Karonga-Chitipa road and Parliament building construction 
were projects originally funded by the Taiwanese.  Taiwan was 
previously the largest bilateral donor for equipment support to the 
Malawi Defense Force.  Taiwan was also a major contributor to health 
care and agriculture projects, most notably the funding, staffing, 
and operations of Mzuzu Central Hospital, the main referral hospital 
for the Northern Region of Malawi, projects that have so far not 
been picked up by the Chinese. 
 
¶5. (SBU) There is no indication yet of what projects will be 
supported by the "soft" loans that make up the bulk of the announced 
aid package, but public discourse here refers to a new stadium, a 
conference center, a "five star hotel," the proposed "University of 
Southern Malawi" (in the President's home area), and other such 
traditional Chinese buildings in Africa.  So far, the two firm 
projects, the road and the Parliament building, have not moved 
forward.  Paladin Mining, which is working at full speed on the 
Kayalekera uranium mine on the road between Karonga and Chitipa, 
reports that they have not seen any sign of activity on the road 
since the Taiwanese left in January and that they have begun their 
own works to "straighten out some of the kinks" to enable the large 
number of heavy trucks supporting the mine to travel on it. 
 
¶6. (SBU) Last week, the government of Malawi gave notice of 
termination to the Malawian consortium which was building the 
National Assembly structure, but the Malawian group has not 
surrendered the site, though they have laid off the 600 Malawians 
who were working there.  They do not know whether any of these 
workers will be re-employed when the Chinese take over the project. 
The contractors have told the government that they will only hand 
over the site when they are paid the very substantial sum (in the 
millions of dollars, still being calculated) that is due under the 
liquidated damages clause of the contract, as in their view the 
cancellation was for the government's convenience.  No one in 
government seems to have noticed the liquidated damages clause when 
the project's support moved from Taiwan to China. 
 
Current Cooperation between US and China Missions 
--------------------------- --------------------- 
 
¶7. (SBU) The Chinese are the newest embassy to open in Lilongwe, and 
until recently have been operating out of a hotel.  China's primary 
focus has been to open up their temporary embassy and other offices 
while they find and secure a location to build a permanent embassy. 
China sent a senior officer (former Ambassador to Uganda) as CDA to 
open the mission, but he has since returned to China, leaving the 
mission under the control of a more junior officer.  The mission is 
still operating out of temporary quarters and awaiting its 
ambassador.  As such, there has been little engagement or 
 
LILONGWE 00000253  002 OF 002 
 
 
cooperation between the missions.  The multi-lateral Heads of 
Mission group, which we chair at the moment and which consists of 
all Heads of Missions of foreign aid donors in Malawi, has invited 
the Chinese to join the group, but there has been no response to our 
letter. 
 
Potential Areas of Bilateral Cooperation 
---------------------------------------- 
 
¶8. (SBU) Defense, health care, agriculture, and infrastructure are 
the most likely areas of bilateral cooperation with the Chinese in 
Malawi.  The Mission previously worked with Taiwan on defense issues 
and coordinated training and equipment support for the MDF's planned 
deployment to Darfur.  The Ministry of National Defence asserts that 
the announced contribution to defense cooperation is expected to be 
used for equipment purchases associated with the Darfur deployment. 
 
 
¶9. (SBU) The U.S. Centers for Disease Control (CDC) also previously 
coordinated with Taiwan on health care system strengthening and 
HIV/AIDS treatment issues.  There is hope that China will be 
interested in taking over the lead role Taiwan previously played in 
the North. Additionally, Malawi has engaged both the U.S. and China 
CDCs about assistance in creating a National Public Health 
Institutes which would be modelled on the CDC.  The former Malawian 
Minister of Health made a trip to China to study how the Chinese CDC 
operated. 
 
¶10. (SBU) The Chinese have already shown an interest in purchasing 
agricultural commodities from Malawi and could be engaged on 
agricultural projects concerning crop diversification, irrigation, 
and introduction of environmentally-friendly technology. Given what 
seems to be a focus on infrastructure, we expect that will be the 
emphasis in the first several years of China's program. 
 
EASTHAM