VZCZCXRO5539
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLS #0937/01 3481424
ZNR UUUUU ZZH
R 141424Z DEC 09
FM AMEMBASSY LUSAKA
TO RUEHC/SECSTATE WASHDC 7505
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP 0196

UNCLAS SECTION 01 OF 02 LUSAKA 000937 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAID KMCA ZA
SUBJECT: MCA-ZAMBIA'S CONSTRAINTS ANALYSIS ROAD SHOW 
 
REF: LUSAKA 206 
 
LUSAKA 00000937  001.2 OF 002 
 
 
SUMMARY 
-------- 
 
¶1. (U) Zambia's Millenium Challenge Account office (MCA-Z) 
presented its preliminary constraints analysis (CA) results 
in a whirlwind 15-day road show to government and private 
sector stakeholders.  The report includes separate 
employability and business environment analyses, and 
concludes that economic growth is constrained by the poor 
health, education and low productivity of the Zambian 
workforce, by underdeveloped infrastructure services, and by 
coordination failures.  The MCA-Z team also presented its 
compact project selection criteria and timeline.  In addition 
to general MCC selection criteria, the MCA-Z team presented 
project selection criteria which it developed using lessons 
learned from previous compact country plans successes and 
challenges.  MCA-Z has an ambitious timeline for project 
identification and selection, with proposal outlines due 
December 11.  End Summary. 
 
MCA-Z CONSTRAINTS ANALYSIS 
-------------------------- 
 
¶2. (U) From November 23 to December 11, MCA-Z National 
Coordinator Bob Liebenthal and Deputy Coordinator Pam Bwalya 
barnstormed sector advisory groups (SAG) that represent 
government and private sector stakeholders across Zambia's 
economic and social sectors to present their preliminary CA 
results.  The CA is a key step in country compact 
development.  At a trade and industry SAG meeting on December 
3, one of 15 SAGs that the team visited, Bwalya explained 
that the MCA-Z CA team adopted a World Bank study on the 
constraints to inclusive growth in Zambia as a key reference 
document, explaining that MCC encourages the use of existing 
studies to avoid "reinventing the wheel." 
 
¶3. (U) MCA-Z analyzed why Zambia's economic growth has been 
constrained, and what is constraining current growth from 
being more inclusive and resulting in greater poverty 
reduction in the country.  The constraints analysis included 
both an employability analysis, in which they examined the 
factors determining the qualitative supply of labor, and a 
business environment analyis, which includes a study of both 
the access to and demand for finance, and factors determining 
economic rates of return. 
 
¶4. (U) The preliminary results show that Zambia suffers from 
both employability and business environment constraints. 
Labor constraints include poor health status, low education 
levels, and low productivity levels, especially in 
agriculture.  The CA also found that a scarcity of 
specialized skills in the workforce was a binding constraint 
on economich growth.  Poor infrastructure services, 
especially in electricity, water and sanitation, rural feeder 
roads, and railway transport, constrain economic growth.  The 
team highlighted high transport costs due to road conditions 
and fuel prices as a binding constraint.  Finally, Zambia 
suffers from coordination and information failures, which 
constitutes a binding constraint as those failures lead to 
high indirect costs in business, undermining Zambia's ability 
to innovate and become more competitive in world markets. 
 
PROJECT SELECTION -- CRITERIA AND TIMELINE 
---------------------------------------- 
 
¶5. (U) The MCA-Z team discussed MCC project selection 
criteria and the next steps in the compact development 
process.  Bwalya also explained additional criteria that the 
MCA-Z team developed using lessons learned from previous 
compact country plans.  The MCA-Z team plans to elicit 
project proposals from across stakeholder groups that not 
only meet MCC criteria, but are generally larger than USD 50 
million and have had some preparatory work done, can leverage 
other financing, either from the private sector or other 
donors, and address binding constraints identified in the CA. 
 The team is looking to choose approximately six projects for 
submission to the MCC as part of Zambia's compact. 
 
¶6. (U) MCA-Z has an ambitious timeline for project submission 
and selection.  Projects were due on December 11, the last 
scheduled day of the CA road show.  MCA-Z plans to start 
consultations with members of parliament, local chiefs, and 
other stakeholders in late December, and to select up to six 
projects for concept paper preparation.  They intend to get 
Cabinet approval by mid-January, and submit proposals to MCC 
by January 22.  As of December 3, MCA-Z had received no 
proposals.  SAGs were meeting ahead of the deadline to try to 
create proposals that would fit the MCA-Z criteria.  A donor 
representative who attended a follow-on trade and industry 
SAG meeting on December 10 told Econoff that the group was 
 
LUSAKA 00000937  002.2 OF 002 
 
 
hard-pressed to meet the deadline, and so their proposals 
were short on detail and overlap with existing assistance 
programs. 
 
COMMENT 
------- 
 
¶7. (SBU) The MCA-Z team has set an ambitious timeline for 
themselves.  They have made significant progress since 
opening the MCA-Z office in summer 2009, and were quick to 
produce a CA.  However, many of the stakeholders at the SAG 
meetings were somewhat unaware of the MCA-Z compact 
development process before the briefing.  MCA-Z will be 
hard-pressed to maintain its pace, receive quality project 
proposals and prepare concept papers for approval by Cabinet 
and submission to MCC by January. 
BOOTH