US embassy cable - 05MASERU182

UNCLAS SECTION 01 OF 02 MASERU 000182 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958: N/A 
TAGS: EAID, ETRD, PGOV, PREL, LT, MCC 
SUBJECT: BASOTHO PUBLIC ENTHUSIASM WANING FOR YET-UNSIGNED MCC 
COMPACT 
 
REF: MASERU 149 
 
1. Summary:  At an April 4 luncheon with GOL Ministers held in 
honor of AF/S Director Dan Mozena's visit, government discussion 
focused mainly on the status of Lesotho's proposal for 
Millennium Challenge Account funds.  Ministers urged MCC 
Associate Country Director Deidra Fair for  incremental release 
of pre-Compact funds.  Ministers Thahane and Malie reiterated 
the  government's request for a Compact-signing timeline and a 
specific list of objectives to accomplish throughout the term of 
the Environmental Impact Assessment (EIA) .  Ministers asserted 
that the initially enthusiastic Basotho are losing interest as 
the third annual qualification for MCC approaches, yet monies 
remain un-disbursed.  Mozena noted that in the U.S., the lengthy 
start-up time of the new agency had frustrated some since only 
one compact had been announced.  The ministers also discussed 
regional trade issues, the current condition of SADC, the state 
of U.S. - SACU  Free Trade Agreement negotiations, and the 
upcoming local government elections.  Note: before she departed 
Maseru, Fair did provide much of the information requested. 
End Summary 
 
------------------- 
GOL VIEWS 
------------------- 
 
2.  During AF/S Director Mozena's familiarization visit to 
Maseru, April 3-6, 2005, Ambassador Perry hosted an April 4 
luncheon gathering of ministers.  Minister of Foreign Affairs 
Moleleki, Mininister of Finance Thahane, Minister of Trade and 
Industry, Cooperatives and Marketing Malie, Minister of 
Agriculture Phororo, and Minister of Local Government Sekatle 
attended.  MCC Associate Country Director Deidra Fair, who 
travelled to Lesotho March 30 - April 9, 2005, for follow-up 
meetings and the April 7-8 Private Sector Development Forum (to 
be reported septel), also attended. 
 
3. While Lesotho qualified to compete for MCC funds in 2004 and 
2005 (and expects to qualify again in 2006) the GOL faces 
increasing public skepticism  for a program that initially 
generated countrywide excitement, according to Minister Malie. 
He suggested holding a press event to release a loose timeline 
and explain the current status of Lesotho's proposal, because he 
perceived growing discontent among Basotho who are eagerly 
anticipating the job creation implicit in infrastructure and 
water development projects.  Ministers agreed that pre-Compact 
release of some resources could revitalize public interest in 
the bulk-water and infrastructure development projects . 
Ministers enunciated the GOL's desire to have a checklist of 
triggers, linked to a specific timeline, demarcating 
disbursement of funds at particular junctures.  Mr. Mozena 
reported a growing climate of concern among U.S. constituencies 
regarding deficit spending, and encouraged the GOL to move 
quickly to utilize MCC funds before Congress might have an 
opportunity to make funds unavailable. 
 
------------------------ 
MCC Response 
------------------------ 
 
4.  In response, Ms. Fair reassured that despite domestic 
imperatives, Lesotho would indeed have access to all three 
years' money upon completion of the Compact. She also indicated 
that although the MCC was not yet ready to commit to such a 
precise timeline,  the agency continues to consider 
gradual-disbursement structures.  The critical milestone for 
moving forward with Lesotho's MCC Compact will be the completion 
of the EIA, but, she added, many interim measures should be 
taken, namely private sector reforms, improvement of access to 
credit, initiation of hydro- and geologic feasibility studies at 
the Metolong Dam Site, and passage of gender and land tenure 
legislation.  Instead of concentrating on project upstarts such 
as roads and electricity extension, which are actually 
incorporated into Lesotho's dam proposal, the GOL should submit 
to the MCC a proposal addendum making a stronger case for how 
the dam project will elicit poverty reduction and development, 
sector by sector. 
 
5. MFA Moleleki suggested that the EIA be conducted in 
conjunction with early phases of the dam project, its findings 
utilized as a tool to mitigate projected negative impacts. 
While the GOL would prefer such a "turnkey" operation, the 
minister alluded to failure of this method during earlier 
highlands projects and ensuing scandals.  Ms. Fair emphasized in 
response that dam projects always invite intense scrutiny from 
Congress and the American public, and that a completed EIA and 
mitigation program would be necessary before funds for the 
Compact could be released.  As far as the MCC and Congress are 
concerned, a concurrent EIA and construction timeline would not 
be acceptable.  Mr. Mozena added that while on-paper reforms are 
necessary, investment-flow into Lesotho would depend heavily 
upon the perception of a business-enabling environment, stemming 
 
MASERU 00000182  002 OF 002 
 
 
from de facto positive experiences of existing business people 
in Lesotho. 
 
6.  Minister Sekatle requested explanation of the differences 
between Lesotho's and Madagascar's MCC timelines, and Ambassador 
Perry cited Madagascar's successful conduction of truly free and 
fair (though difficult)  national elections and pursuit of 
politically risky reforms as clear signals to the U.S. of that 
country's commitment.  Madagascar's proposal also encompasses 
diverse rural development goals rather than a single, 
contentious infrastructure development project, which made for 
an easier "sell" to the U.S. public and Congress. 
 
--------------------------------------------- ----------------- 
Regional Trade Structures; Local Elections 
--------------------------------------------- ----------------- 
 
7.  Regarding the end of Lesotho's term as chair of the SADC 
organ troika, Ministers Malie, Thahane, and Phororo classified 
the recently-restructured organization as "more executive" and 
less dynamic, neither clarifying the specific roles member 
states are to play, nor rendering less blurry the overlap 
between NEPAD and SADC.  Internal conflicts of interest caused 
by dual memberships in entities such as COMESA and SACU obstruct 
U.S. dialogue with SADC, but the Minister of Agriculture asked 
how the entire organization could be ostracized due to the 
behavior of one member.  Mr. Mozena reminded that the remaining 
SADC member states have repeatedly refused U.S. offers to engage 
in dialogue excluding Zimbabwe. 
 
8.  Discussions also covered the state of U.S. - SACU FTA 
negotiations. Minister Malie attributed the stalemate, which 
stalled at the introduction of "second phase" issues including 
government procurement and the environment, to a lack of 
flexibility on the part of the U.S. regarding the template 
although the GOL has been one of the leading proponents of the 
SACU-FTA.  Mozena explained that the U.S. presents the FTA as a 
package rather than a phased agreement in order to sell the 
policy in an increasingly hostile domestic environment. 
 
9.   Other topics included the April 30, 2005 local government 
elections and the vocal opposition to the requirement for 1/3 of 
seats to go to female candidates.  Minister Sekatle pointed out 
that in many districts the GOL expects as many as 50% or more 
seats to go to women, and described one constituency where women 
already hold nine of eleven local leadership positions.  Mr. 
Mozena concluded by commending the Government of Lesotho for its 
commitment to key U.S. interests, namely democracy and liberty, 
and aggressive approach to combat the spread of HIV/AIDS. 
 
10.  Comment: While the ministers'  concern about the slow pace 
of the MCC proposal approval process is understandable from 
their point of view, it should be noted that the original 
proposed Compact submitted in late September of 2004 required 
substantial reworking.  The second version was ready only a few 
days before the MCC technical team visit in March (ref).   As 
the team noted then, large infrastructure projects, particularly 
involving dams, will undergo intense examination both within the 
MCC and by Congress, thus lengthening  project preparation time. 
  After consultations with the Ambassador and subsequently with 
DCM and AF/S Director as well as with the MCC home office, Ms. 
Fair did provide the GOL an excellent informal timeline of the 
remaining steps in the approval process and a list of actions 
that the GOL should undertake while the EIA is conducted.  MCC 
may be able to assist in funding some of these activities -- a 
measure that would address the public concerns noted.  End 
Comment. 
 
 
 
PERRY