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Cablegate: Tanzania: Secretary Paulson and President Kikwete Discuss

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RR RUEHWEB

DE RUEHDR #1587/01 3480406
ZNR UUUUU ZZH
R 140406Z DEC 07
FM AMEMBASSY DAR ES SALAAM
TO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHC/SECSTATE WASHDC 7151
INFO RUEHJB/AMEMBASSY BUJUMBURA 2617
RUEHKM/AMEMBASSY KAMPALA 3105
RUEHLGB/AMEMBASSY KIGALI 1052
RUEHNR/AMEMBASSY NAIROBI 0871
RUEHDS/AMEMBASSY ADDIS ABABA 3272

UNCLAS DAR ES SALAAM 001587

SIPDIS

SENSITIVE, SIPDIS

TREASURY FOR CLOWERY, VBRANDON
DEPT AF/E FOR JLIDDLE, AF/EPS FOR ABREITER
COMMERCE/ITA FOR BERKUL
PASS TO USTR FOR FLISER, WJACKSON
ADDIS FOR AU MISSION

E.O. 12958: N/A
TAGS: ETRD EFIN EAID ECON PREL TZ

SUBJECT: TANZANIA: SECRETARY PAULSON AND PRESIDENT KIKWETE DISCUSS
CAPITAL MARKETS, BOEING AND GOOD GOVERNANCE

Summary
-------
1. (U) President Jakaya Kikwete told U.S. Secretary of Treasury,
Henry Paulson, on November 15 that he would welcome more capital
market investment in Tanzania to accelerate economic growth and
raise the per capita income. Secretary Paulson expressed
appreciation for both President Kikwete and Finance Minister Zakia
Meghji's strong leadership. He reminded President Kikwete that the
Air Tanzania Company (ATC) needed to maintain high levels of
transparency and accountability in deciding which aircraft to
purchase or lease to expand its aging fleet. Secretary Paulson
pledged to continue to work closely with Tanzania's finance ministry
and to advocate in Washington DC for policies to strengthen East
African regional economic growth. End summary.

2. (U) During a cordial discussion at the conclusion of his two-day
trip to Arusha, Tanzania, Secretary Paulson outlined for President
Kikwete the highlights of his November 14 to 15 visit. Paulson
noted that the working lunch with the East African Finance Ministers
had focused on capital markets and infrastructure needs within the
region. He commended the innovative USAID wildlife project he
observed at Manyara Ranch as well an Arusha mosquito net factory he
toured earlier in the day. The Secretary highlighted the factory as
an example of the USG and Government of Tanzania (GOT)'s joint
efforts to fight poverty and eradicate malaria at the same time.

3. (SBU) Secretary Paulson told President Kikwete he had emphasized
to the EAC Finance Ministers as well as to the press, the strong,
consistent support that President Bush has given to the fight
against malaria and against HIV/AIDS Africa. The Secretary also
expressed his appreciation to President Kikwete that the draft
Tourism Act 2007, which had raised serious concerns among U.S.-owned
safari companies in Tanzania, would not be tabled in Parliament
until early 2008. This postponement would allow stakeholders enough
time to forward their comments and discuss their concerns with
officials at the Ministry of Natural Resources and Tourism.

HIV/AIDS and Malaria Campaigns
------------------------------
4. (U) President Kikwete thanked the Secretary for his visit and
emphasized that the relationship between Tanzania and the U.S. is
"better than ever." He noted that during his two meetings with the
President last year: "President Bush expressed appreciation for our
growing bilateral relationship; we intend to continue to cooperate
in many areas."

5. (U) President Kikwete outlined the progress that has been made in
Tanzania in the fight against both HIV/AIDS and malaria. He said
that nationwide HIV/AIDS testing campaign had reached 1.9 million
persons to date in 2007, as compared to only 250,000 Tanzanians
during the same time period in 2006. In the anti-malaria campaign,
Kikwete stressed that the GOT is working closely with the United
States and other partners to reach 26 critical areas in Tanzania
where the malaria infection rate is the highest.

6. (SBU) President Kikwete noted that the signing of the MCC compact
would initiate critical projects to improve Tanzania's road, water
and power networks. He reiterated that his administration is
committed to good governance. "We listen to our friends: if they say
you need to go this way, we take note," President Kikwete affirmed.
He added, "In some areas we are not doing as well as in others, but
our government is committed to respect human rights, rule of law,
transparency and accountability." Ambassador Green stressed that
the MCC compact opened up a unique opportunity to make substantial
progress in economic development as well as transparency and
accountability.

Boeing
-------
7. (SBU) While encouraging President Kikwete to keep up the fight
against corruption, Secretary Paulson noted the USG's concern that
the ongoing deliberations of Air Tanzania to expand its fleet by
purchasing or leasing planes from either Boeing or Airbus did not
appear transparent. Paulson emphasized the importance of following
internationally accepted standards. President Kikwete replied he
had received reports that the acquisition process "may not have been
handled properly" and subsequently asked for a briefing from the
Permanent Secretary of Infrastructure. He had learned that the
Board of Air Tanzania Company (ATC) chose not to carry out an open

tender, but rather had requested proposals directly from three
companies. Only Boeing and Airbus had responded with business and
financial proposals. He understood that key factors in the ATC
Board deliberation was the delivery dates of the aircraft and 2) the
commercial offers.

8. (SBU) President Kikwete said when he had met with Assistant USTR
Florie Liser on November 12, she had voiced similar concerns over
ATC's acquisition process. He thus gave instructions for the ATC
Board to meet AUSTR Liser on November 13 and to be open and answer
all her questions about what had transpired to date. Kikwete
explained that ATC had decided to lease, then purchase Airbus planes
for the shorter, regional routes. For the longer routes to the
United Kingdom or China, the ATC Board preferred Boeing aircraft.
However, since the delivery date for larger Boeing aircraft was not
until 2018, plans were currently being discussed to lease Boeing
planes in the near future to cover the longer routes.

9. (SBU) Secretary Paulson expressed appreciation for President
Kikwete's close involvement in this and other important economic
decisions. The Secretary suggested, however, that such high-level
acquisition decisions needed to be handled properly, not just from a
GOT internal perspective, but equally, if not more importantly, in a
manner to assure the process is transparent to all bidders and to
the public. "When there is good governance," Paulson stressed, "the
entire process would be open and allow all parties to know the
criteria through a Request for Proposals." Also, once a decision is
made, the award should be publicly announced so that both the winner
and the loser know the basis for the final decision.

Capital Markets
---------------
10. (SBU) Kikwete expressed his "impatience" that the capital market
flows into Tanzania and the region were not adequate. "We need a
variety of capital markets," he stated. Secretary Paulson assured
him that the USG was ready to work with the East African region. He
pointed out that the Department of Treasury has a resident regional
expert from its Office of Technical Assistance (OTA) based in
Nairobi who is working throughout the East African Region to advise
in this area.

11. (U) Kikwete remarked that during his 2006 trip to New York he
had visited NASDAQ and the New York Stock Exchange; both
organizations were ready to assist and deepen the relationship with
Tanzania. The President added: "I realize that Tanzania's capital
markets are still small, but we are ready to work with others to
restructure our institutions." Kikwete noted that Tanzania still
has a very low per capita income of less than USD 370: "Many
countries have been as poor as we are, but now they are better off."

Secretary Paulson emphasized that his discussions with the EAC
finance ministers had been highly encouraging. He would report back
to Washington and recommend programs to deepen cooperation with the
GOT and other regional governments.

12. (U) President Kikwete reiterated his appreciation for the close
cooperation with President Bush's administration: "We would like to
keep it that way; our relationship has never been this close to the
United States before." Secretary Paulson concluded with the
assurance that the Treasury Department will work closely with
Tanzania's Finance Minister, Zakia Meghji, and with the other EAC
finance ministers and would continue to advocate in Washington to
support East African economic growth.
GREEN

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