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Cablegate: Mcc Compact Update

VZCZCXRO8124
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1345 3200923
ZNR UUUUU ZZH
R 160923Z NOV 07
FM AMEMBASSY MAPUTO
TO RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHDC
INFO RUEHC/SECSTATE WASHDC 8203
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

UNCLAS MAPUTO 001345

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON PGOV PREL MZ
SUBJECT: MCC COMPACT UPDATE


1. The Embassy welcomes the November 17-21 visit by
Ambassador John Danilovich, Chief Executive Officer for the
Millennium Challenge Corporation, and provides the
following short update of MCC implementation activities in-
country since the July 13 Compact signing in Washington.

2. On August 7, the Mozambican Council of Ministers
ratified the Compact, as required by the agreement. At the
same time, the Council of Ministers approved the creation
of MCA Mozambique, a public institution under Mozambican
law with distinct legal and administrative autonomy for the
implementation of the Compact. On August 21, the Council
of Ministers approved a new Water Sector Policy which
includes a water resources management strategy, national
water policy, and water allocation licensing regulation
all key policy reforms included in the Compact. The World
Bank is cooperating with the MCC to promote
additional reform and investment in the water sector. In
addition, the African Development Bank, the European Union,
and Japan Bank for International Cooperation have expressed
interest in supporting the water sector, based on the Water
Policy commitments made by the Government of Mozambique to
MCC and the World Bank.

3. Following an open and competitive recruitment process,
the GRM has selected many of the key staff of the
Management Unit of the MCA Mozambique, whose names were
formally submitted to MCC for approval. In addition, key
line ministries and institutions, such as Ministry of
Public Works, Ministry of Agriculture, and the Ministry of
Finance, continue to prepare and plan for the
implementation of their respective projects and activities.

4. MCC and the Ministry of Finance have negotiated a Tax
Agreement, defining the tax exemption mechanisms for the
Compact, which is expected to be executed by end-November.
Furthermore, MCC and the GRM have finalized a Compact
Implementation Funding Letter, allowing up to US $25
million to be disbursed during the next nine months for
Compact start-up. On November 2, the Executive Committee
of MCA Mozambique held its first meeting in which members
approved the first disbursement request to MCC and other
key documents and requirements for the implementation of
the Compact.

5. The Compact enjoys strong support from the top
leadership of the Mozambican government, including
President Armando Guebuza, and has strong private sector
and civil society support as well. Also, the Embassy and
MCA Mozambique are meeting regularly with other donors to
further leverage the MCC investment. Some donors continue
to have questions and concerns about implementation
mechanisms and MCC-negotiated tax agreements. Through
frequent meetings and informational sessions, these
concerns are being addressed. Mozambican public interest
and support for the MCC remains high.

CHAPMAN

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