Cablegate: Treasury Deputy Secretary Wolin"S Meeting with President

VZCZCXYZ0000
RR RUEHWEB

DE RUEHDR #0769/01 3160328
ZNR UUUUU ZZH
R 120328Z NOV 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 9004
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLGB/AMEMBASSY KIGALI 1468
RUEHSA/AMEMBASSY PRETORIA 3722

UNCLAS DAR ES SALAAM 000769

SIPDIS
SENSITIVE

DEPARTMENT FOR AF/E JTREADWELL, INR FEHRENREICH
DEPARTMENT PASS TO TREASURY DEPSEC WOLIN, DPETERS, RKLEIN

E.O. 12958: N/A
TAGS: EFIN EINV ECON EAGR ECIN PGOV PREL TZ
SUBJECT: TREASURY DEPUTY SECRETARY WOLIN"S MEETING WITH PRESIDENT
KIKWETE

1. (SBU) SUMMARY: In a November 2 meeting at State House, President
Jakaya Kikwete thanked visiting Treasury Deputy Secretary Neal Wolin
for ongoing U.S. assistance to Tanzania, including $37.7 million in
Financial Crisis Initiative funding that the Deputy Secretary and
Finance Minister Mkulo announced to the press following the meeting.
Kikwete admitted the need to improve Tanzania's investment climate
to spur growth, underscored his commitment to developing Tanzania's
agricultural sector, and discussed challenges to developing regional
transport connections through the Central Corridor. Deputy
Secretary Wolin encouraged development of Tanzania's capital
markets, in part as a means towards attracting investment, and noted
the importance of extending Tanzania's anti-money laundering
legislation to Zanzibar. END SUMMARY.

2. (SBU) President Kikwete praised the state of bilateral relations,
to which he said the visit had contributed. He expressed his
appreciation for U.S. assistance in the health sector, especially
regarding malaria and HIV, as well as for support for education. He
noted his satisfaction with the Millennium Challenge Compact, in
particular that its development was Tanzania-driven and that the
U.S. was supporting Tanzanian priorities. Deputy Secretary Wolin
previewed the 2010 MCC indicator "scorecard," which he characterized
as "almost entirely a good news story," noted our mutual interest in
success of the compact, and stressed that the success of the compact
would be a foundation for future cooperation.

3. (SBU) Investment climate: Remarking that the country's economic
growth depended on promoting investment, Kikwete said that Tanzania
had been improving its investment climate but continued to face
challenges. He listed some guarantees to ensure safe investments,
such as the legal prohibition against nationalization and protection
for repatriating profits and dividends. Acknowledging that
Tanzania's supply-side constraints had limited utilization of AGOA,
Kikwete said he had established a team to analyze and respond to the
deficiencies identified in the World Bank's Doing Business report.
He acknowledged that there are clear problems that could be easily
handled, such as the requirement for every new business to get a
certification from the geological survey regardless of the type of
business. Kikwete said that he instructed his cabinet to make these
changes immediately before turning to the more difficult problems.
He commented that the GOT was grappling with the supply-side
constraints that limited Tanzania's use of AGOA. Deputy Secretary
Wolin noted that the U.S. private sector is keen to do business
where the environment is attractive and suggested that Tanzanian
development of its capital markets would ease the entry of
investors. Deputy Secretary Wolin noted that the U.S. Treasury
Department currently provides a resident advisor who is working on
development of local debt markets. .

4. (SBU) Agriculture: Noting the importance of agriculture and food
security to President Obama, Deputy Secretary Wolin said his
November 1 visit to an International Institute for Tropical
Agriculture cassava research site near the town of Bagamoyo had
shown him a good example of a Tanzanian project focusing on food
security and poverty reduction. Kikwete was clearly pleased to hear
about the visit, mentioning that Bagamoyo was his home town.
Kikwete said he was trying to increase funding for agriculture, to
lift it from fifth to fourth (behind education, infrastructure and
health) in the GOT budget. He said he planned to attend the
upcoming Rome meeting on agriculture. Asked about the ban on
international trade in Tanzanian maize, Kikwete insisted it was a
temporary policy to prevent vital food stores being sold off to
Kenya during the present drought. Kikwete pointed out that Tanzania
is surrounded by countries of much greater population density,Q
whd&rE,x9ipKQm!Qct as a brake on regional integration. On inputs,
Kikwete mentioned TanzaniaQs natural gas and phosphate resources,
and his intention to identify capital and expertise to set up plants
within Tanzania to convert these resources into fertilizer.

5. (SBU) Infrastructure: Kikwete emphasized Tanzania's commitment to
developing the Central Corridor linking the Port of Dar es Salaam
with Rwanda, Burundi, Uganda and eastern DRC. He said only a few
gaps remained before a paved road would connect Tanzania to all of
its western neighbors. Turning to rails, he alluded to a
(USTDA-sponsored) study conducted by U.S. railroad company
Burlington Northern Santa Fe, which indicated that upgrading the
Central Line to standard gauge rail would be viable and could use
the same works as the nearly hundred year-old, German-built line.
Kikwete said the GOT had a basic agreement on rails with Rwanda and
Burundi and was looking to the African Development Bank to be the
lead financier. Kikwete said there were two additional railroads
that he saw as priorities: a line from Dar es Salaam to Musoma,

connecting to a ferry route on Lake Victoria, and a line from Dar es
Salaam to Kigoma. Turning to the Port of Dar es Salaam, he
acknowledged that there had been management problems, but that the
GOT had renegotiated with the concessionaire for container services
(TICTS) to cancel the contract's exclusivity clause, thus opening
the port to other investors. He said the government is discussing
port management with BNSF. He also cited the GOT's difficulty with
the concessionaire for Central Line rail service (RITES), which he
said received the contract in part because of lack of interest from
major operators. Kikwete said GOT dissatisfaction with the RITES
managers in country had not persuaded RITES headquarters to agree to
personnel changes.

6. (SBU) Corruption: Deputy Secretary Wolin raised the issue of
corruption and stressed the importance of remaining vigilant in
addressing the problem of corruption. Kikwete stressed the
difficulty of fighting corruption, saying it was challenging to say
that friends should be taken to court. Remarking that his
anti-corruption agency (the Preventing and Combating of Corruption
Bureau, PCCB) was not required to notify him in advance of a
prosecution, he said he asked to be notified a few hours ahead of an
arrest, as had been the case in the Alex Stewart Assayers case. He
said he was troubled that one of his ambassadors was in court (Note:
this refers to alleged corruption in the construction of Tanzania's
embassy in Rome). Deputy Secretary Wolin commented that corruption
exists in all countries, that the important question is how to set
up structures to minimize corruption and react when corruption is
discovered.

7. (SBU) Bond issuance: Deputy Secretary Wolin said the U.S. stood
ready to assist Tanzania if it moved ahead with the issuance of a
Eurobond. The Deputy Secretary noted that markets were improving
and that an external bond could help foreign investors gain a better
understanding of Tanzania in addition to providing financing.
Kikwete said Tanzania had made progress on the bond process but then
was put off by the global financial crisis. While a Eurobond issue
would be on hold until "the cloud clears," the GOT was looking at
ways to finance infrastructure through local bond issues. He
expressed interest in U.S. assistance when Tanzania moved forward
with the Eurobond. In a subsequent meeting without President
Kikwete, Mkulo told Deputy Secretary Wolin that the GOT would
proceed immediately towards seeking a credit rating and would update
Embassy Dar es Salaam by the end of the month. Deputy Secretary
Wolin, saying the markets were "moving towards readiness,"
encouraged Mkulo to "get the timing right."

8. (SBU) AML: Deputy Secretary Wolin encouraged action on anti-money
laundering (AML) legislation in Zanzibar. Kikwete responded that
the issue was under discussion, since Zanzibar wanted its own
legislation. The Union government insisted that Zanzibar could not
have looser standards than the GOT's legislation, which conformed to
international norms. During his separate meeting with Deputy
Secretary Wolin, Mkulo went into further detail about the status of
AML legislation in Zanzibar. He said that although monetary matters
are a Union competence, the 2006 AML Act needed to be "domesticated"
by the Zanzibar House of Representatives to enter into effect for
the islands. However, Zanzibar had indicated a preference to pass
its own legislation, in part because criminal matters are a Zanzibar
competence. Mkulo said that although Zanzibar had been "fully
involved" in enacting the 2006 Act, the Zanzibar government had not
responded to Union requests to explain any objections to the law.
Mkulo concluded by saying that President Kikwete had tasked Vice
President Shein with resolving the issue.

9. (SBU) AML/CFT assessments: Referencing the recent assessment of
Tanzania's AML/CFT system by the FATF-style regional body, Deputy
Secretary Wolin noted that the United States felt strongly about the
transparency of AML/CFT assessments. He stated that FATF-style
regional body (FSRB) review missions must have the freedom to carry
out assessments and make the results of those assessments public and
transparent. Mkulo stated that he understood the U.S. position,
that he had already sent a letter to the head of the Eastern and
Southern Africa Anti-Money Laundering Group (ESAAMLAG) indicating
that Tanzania was generally ok with the release of the Tanzanian
assessment. He stated that he would also call the head of ESAAMLAG
to follow up on the issue.

11. (SBU) COMMENT: President Kikwete extended unprecedented
courtesies over the course of an unusually long two-hour audience
with Deputy Secretary Wolin. He was relaxed, engaged and upbeat,
often citing statistics to back his points and demonstrate his
command of the economic and food security portfolios. He and
Deputy Secretary Wolin had a jovial discussion of American sports at
the end of the meeting and Kikwete confirmed that he is a Chicago
Bulls fan. Kikwete responded on a personal level to the warm
expressions of partnership and offers of technical assistance made

by Deputy Secretary Wolin. END COMMENT.

12. (U) Deputy Secretary Wolin cleared this message.

ANDRE

© Scoop Media