Cablegate: Extractive Industries Transparency Initiative:

VZCZCXRO7887
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1070 2731057
ZNR UUUUU ZZH
R 301057Z SEP 09
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 0799
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0520
RUEHNY/AMEMBASSY OSLO 0180
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS MAPUTO 001070

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EINV EMIN EPET ETRD PREL PGOV MZ
SUBJECT: EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE:
SLOW PROGRESS, URGENT NEED

REF: 08 MAPUTO 1073

1. (U) SUMMARY: The GRM declared its intent to adhere to
the principles of the Extractive Industries Transparency
Initiative (EITI) in 2008, ultimately joining EITI in May of
this year. The GRM has made little progress in
implementation however and claims lack of funds, putting
compliance into jeopardy. Projected revenue from natural
resource mega-projects could surpass all international donor
assistance within five years, suggesting that Mozambique
could benefit greatly from EITI implementation. END SUMMARY.

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LITTLE EITI PROGRESS
--------------------

2. (SBU) The Government of Mozambique (GRM) formally joined
the Extractive Industries Transparency Initiative (EITI) in
May 2009 as a candidate country and has two years to reach
compliance status. Dr. Abdul Razak Noormahomed, Deputy
Minister of Mineral Resources and the leader of the GRM's
EITI effort, told Econoffs in mid-September that twenty-nine
other countries are also in the candidate stage of the
initiative. He indicated that after signing onto the
initiative, the GRM created a workplan. For the second half
of 2009, the GRM was supposed to do many things: call its
first formal EITI-committee meeting, identify companies to
participate in the process, recruit an auditor, and establish
an official website. To date the GRM has not completed any
of the steps in the workplan, however.

3. (SBU) In a September 22 meeting with International
Monetary Fund (IMF) representatives, the GRM reiterated its
commitment to EITI, and said it would create a local
secretariat by March 2010, but said it does not have the
funds nor capacity to implement EITI alone. The IMF has now
asked the donor community to assist in implementation.
According to an economic advisor with the UK's Department for
International Development (DFID), the March 2010 deadline for
the creation of the governing body is very optimistic given
that the GRM has yet to make a request for funds to set up
the secretariat and begin general implementation. An
economist from the Norwegian Embassy traveled in late
September to meet with EITI secretariat officials in Oslo to
discuss how the donor community can assist Mozambique with
implementation.

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MASSIVE NATURAL RESOURCE REVENUES PROJECTED
-------------------------------------------

4. (SBU) The projected revenue of new natural resources
found in Mozambique could surpass all international donor
assistance within a few years. The DFID economic advisor
told Econoff on September 17 that conservative economic
modeling suggests that natural resource mega-projects could
add an additional $40-$50 million per year to state
revenue--without the discovery of oil. If oil is discovered
in Mozambique--and currently there are five concession areas
being explored (reftel)--then state revenue could increase by
up to $600 million per year, possibly reaching $850 million
per year within five years.

--------------------------------------------
COMMENT: NEED TO PRESS FORWARD ON COMPLIANCE
------------------------------------------

5. (SBU) Implementation of EITI before the potential
discovery of oil could help create a concrete framework of
revenue reporting and stave off corruption. Slow progress
towards implementation is of concern, however, as it could
jeopardize the GRM's continued participation in EITI--at the
most recent EITI board meeting in Washington, it was
emphasized that some countries which still have not started
their validation process could be removed from the
initiative. Continued support from international donors may
be the only way to ensure the GRM continues to move towards
implementation.
ROTH

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