VZCZCXRO0576
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0666/01 1671549
ZNR UUUUU ZZH
R 161549Z JUN 09 ZDK
FM AMEMBASSY MAPUTO
TO RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHC/SECSTATE WASHDC 0399
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0424
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUCLRFA/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 MAPUTO 000666 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID EINV PGOV EAGR PREL SENV SOCI ETRD ELTN
EWWT, MZ 
SUBJECT: MCC COMPACT IMPLEMENTATION TRIGGERS WATER AND LAND 
POLICY REFORMS 
 
MAPUTO 00000666  001.2 OF 002 
 
 
¶1.  SUMMARY:  In 2007 the Millennium Challenge Corporation 
(MCC) signed a five-year, $506.9 million Compact with the 
Government of Mozambique (GRM).  Since the Compact entered 
into force in September 2008, the GRM has made measurable 
strides in improving the framework for water/sanitation 
administration, streamlining government processes and 
attracting the private sector to take on a greater role in 
this area.  Also, the GRM has also made some progress in land 
tenure reform, again creating an environment for greater 
private sector participation.  The GRM's concrete efforts to 
fulfill its Compact commitments evidence strong political 
will in these specific policy areas at a time when many 
observers have questioned the GRM's seriousness about 
economic reform.  The MCC approach of linking policy reforms 
with project reforms is yielding results in Mozambique.  END 
SUMMARY. 
 
---------- 
Background 
---------- 
 
¶2.  On July 13, 2007 the Millennium Challenge Corporation 
(MCC) signed a five-year, $506.9 million Compact with the 
Government of the Republic of Mozambique (GRM) to improve 
rural and urban water and sanitation, roads, land 
administration and agriculture.  The MCC program focuses on 
the economically lagging northern provinces of the country, 
home to half of the country's population.  The Mozambique 
Compact includes key policy reforms and capacity building 
initiatives needed to advance development and economic growth 
in various sectors.  These are covenants for disbursement of 
funds.  The first year of Compact implementation began in 
September 2008 and since that time the GRM has made key 
policy reforms in two areas: the water and land sectors. 
 
----------------------------------- 
Advances in Water/Sanitation Reform 
----------------------------------- 
 
¶3.  The Compact is helping to advance the GRM's policies for 
the water sector, including funding to operationalize the 
legal, regulatory, and institutional framework for attracting 
private sector participation in building, operating, and 
maintaining water and sanitation systems in cities across the 
country.  The GRM committed to a series of policy and 
institutional reforms that will ensure the sustainability of 
the water sector and maximize the benefits of the MCC 
investment.  These reforms include: 
 
--The establishment of an Urban Water and Sanitation Policy; 
 
--The creation of a new autonomous institution, 
Administration of Water and Sanitation Infrastructure 
(AIAS)to serve as the asset manager and contracting party 
with private operators and provincial water boards, defined 
under the GOM's water policy for delegated management; 
 
--The expansion of the regulatory authority of the Council 
for Water Regulation and Distribution (CRA); 
 
--The inclusion of Operation and Maintenance Costs for 
Sanitation (to be included in the water supply billing); and 
 
--The implementation of a Rural Water Supply Implementation 
Manual (MIPAR). 
 
¶4.  Private sector participation is the guiding principle of 
the GRM's policy in the water sector, and is crucial to 
improving infrastructure quality and service levels.  This is 
also in the context of decentralization and de-concentration 
efforts by the GRM.  With the assistance of MCC funding and 
the technical assistance of the World Bank, the GRM is now in 
a position to further develop and operationalize its existing 
sector strategies and policies. 
 
¶5.  This Water Policy was approved and enacted by the Council 
of Ministries in August 2007, shortly after Compact signing. 
With this policy, Mozambique has established the basic 
institutional framework for delegated management of water and 
sanitation services to the private sector.  In April 2009, 
the Council of Ministers also approved two decrees that 
legally established AIAS, the autonomous institution that is 
the asset manager of the water and sanitation systems in 
mid-size cities across the country.  It also passed the 
decree for the establishment of CPAS, the provincial water 
 
MAPUTO 00000666  002.2 OF 002 
 
 
boards. 
 
----------------------- 
Advances in Land Tenure 
----------------------- 
 
¶6.  In the area of land tenure and administration, the GRM 
committed to engage in a process of regulatory and 
administrative reform to improve the efficiency, 
transparency, and security of the processes for transferring 
and acquiring land rights, in both rural and urban areas. 
The need for a more functional regulatory framework was 
reconfirmed in recent months by a number of land regulatory 
issues that were discussed in Council of Ministers meetings. 
These efforts also underline that there is a need for a 
overarching sector approach to tackle this challenge.  Under 
the Compact with MCC, the Government commits to the 
establishment of a Land Policy Consultative Forum (LPCF) to 
steer and coordinate this reform.  It would be comprised of 
relevant governmental ministries, civil society organizations 
and academic institutions, and conduct regular semi-annual 
meetings.  Consultations on the LPCF have already taken place 
and a position paper has been prepared by the Ministry of 
Agriculture and submitted to the Council of Ministers for 
approval. 
 
------------------------------ 
Comment: Progress in Key Areas 
------------------------------ 
 
¶7.  The GRM has has taken concrete steps to fulfill its 
commitments and obligations for the policy reforms under the 
Compact in the areas of the water sector and land tenure. 
This show of strong political will at the highest level of 
the GRM is a positive sign, just at a time when many 
observers have questioned whether the Guebuza administration 
is really serious about improving Mozambique's business and 
investment environment.  The MCC approach of linking policy 
reforms with project reforms is yielding results in 
Mozambique. 
CHAPMAN