US embassy cable - 05LILONGWE457

UNCLAS SECTION 01 OF 03 LILONGWE 000457 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S, INR/AA 
 
E.O. 12958: N/A 
TAGS: PGOV, KDEM, KCOR, ECON, KPAO, MI, Political, President 
SUBJECT: PRESIDENT MUTHARIKA'S FIRST YEAR IN POWER 
 
REF: A. LILONGWE 438 
 
     B. LILONGWE 341 
     C. LILONGWE 333 
     D. 04 LILONGWE 820 
     E. LILONGWE 338 
 
Sensitive but Unclassified - Not for Internet distribution 
 
1.  SUMMARY: Bingu wa Mutharika's first year as President of 
Malawi has seen ups and downs.  The questionable nature of the 
May 2004 presidential election created an unsettled political 
atmosphere that would have tested any president.  His 
inaugural speech generated hope with its emphasis on the 
creation of stable macroeconomic conditions and a corruption- 
free nation.  Mutharika's resignation from the United 
Democratic Front (UDF) served as a declaration of political 
independence from his predecessor, Dr. Bakili Muluzi, who 
handpicked Mutharika in an effort to continue to hold power. 
However, Mutharika's formation of the Democratic Progressive 
Party (DPP) has resulted in a loss of public support and 
sympathy, largely due to the general public's view that the 
DPP is not dramatically different from the UDF.  END SUMMARY. 
 
AN ECONOMIC PROMISE 
------------------- 
 
2.  Mutharika's inaugural speech generated hope with its 
emphasis on the creation of stable macroeconomic conditions 
and a corruption free nation.  Unlike his predecessor, 
Mutharika believes that poverty can be reduced through 
significant economic growth and that significant economic 
growth can only occur in a stable macroeconomic environment 
including with low interest rates, stable exchange rates, and 
low single digit inflation.  To achieve these goals the 
President promised to resume an economic program with the IMF 
to access greater resources and reduce domestic debt, which 
would lead to increased private sector savings and investment 
and economic growth.  Mutharika has, to some extent, lived up 
to this promise.  The budget deficit is less than seven 
percent of Gross Domestic Product; his predecessor ran a 
budget deficit of more than fourteen percent. Government has 
achieved almost all of its expenditure targets for the past 
year.  Most donors that provide budgetary support have resumed 
some aid and the IMF has issued satisfactory reports for all 
its monitoring visits in the past year.  Prospects for a new 
funded IMF program are generally considered to be good. 
 
THE POLITICS OF PRIVATIZATION 
----------------------------- 
 
3.  Under Mutharika, government presence in the economy 
continues to be relatively high and the administration has 
shown little urgency to privatize.  The privatization program 
was temporarily suspended for several months last year to take 
stock of past performance and to vet pending deals for signs 
of corruption.  Government has also recently shown worrying 
signs of protecting domestic industries through import 
restrictions (milk imports from Zimbabwe and beverages from 
Zambia) based on weak justification.  The most notable 
development for the private sector, however, has been the 
reduction of interest rates from 40 percent to 25 percent last 
year--a good move, but small relief to private-sector 
borrowers. 
 
ANTI-CORRUPTION: SLOWLY AND UNSURELY 
------------------------------------ 
 
4.  President Mutharika's most watched promise from his 
inaugural speech was "zero tolerance against corruption". 
Endemic official corruption under his predecessor was part of 
the reason the UDF did not achieve a clean sweep in the 2004 
elections.  The arrests of former Finance Minister Friday 
Jumbe and former senior UDF official Humphrey Mvula on 
corruption charges were well received by the general public as 
a break with the corrupt Muluzi administration of the past ten 
years.  Mutharika has recently fired his sitting Minister of 
Education (who has strong ties to Muluzi) after he was 
arrested for corruption (reftel A). However, the lack of high- 
level convictions has created doubt among Malawians about 
Mutharika's seriousness in prosecuting corruption.  In 
addition, the accused and their supporters have been able, 
with some success, to portray their arrests as politically 
motivated.  However, there has been one significant corruption 
conviction.  Blantyre City Mayor John Chikakwiya was sentenced 
to more than three years of hard labor for stealing 
approximately $4,000 of private donations meant for a road 
rehabilitation project (reftel B).  Chikakwiya's conviction is 
significant as he is the Governor of Muluzi's UDF party in its 
heartland, the Southern region - a position that would 
previously have made him untouchable. 
 
A PARTY IS BORN 
--------------- 
 
5.  Concurrent with his "zero tolerance for corruption" 
policy, President Mutharika's most obvious political challenge 
was to declare his independence from his predecessor, Dr. 
Bakili Muluzi (reftel C).  Prior to Mutharika's departure from 
the UDF, it was common knowledge that Muluzi had handpicked 
Mutharika so that he could continue to hold the power behind 
the "throne"."  Mutharika's quest for political autonomy led 
to a divide within the UDF - one faction backed the party's 
National Chairman (Muluzi) while the other faction backed 
President Mutharika.  The main cause of the divide was 
Mutharika's anti-corruption campaign, which netted a few of 
Muluzi's close associates. The divide became complete when 
Mutharika left the UDF in early February 2005. 
 
6.  President Mutharika's abandonment of the UDF was probably 
his most popular act during his first year in office. 
However, Mutharika's move to form his own party, the 
Democratic Progressive Party (DPP), has resulted in a loss of 
public support and sympathy, largely attributed to the make up 
of the new party.  With a considerable number of the DPP's 
leadership having originally come from the UDF, the party is 
not viewed as so dramatically different from the UDF. Another 
image problem for the DPP has been the fact that party 
membership consists primarily of political opportunists who 
have joined the party in a quest for political ingratiation. 
A good example is the party's Publicity Secretary, Dr. 
Hetherwick Ntaba, who is also Malawi's Health Minister.  Since 
January 2004, Ntaba resigned from three different political 
parties before joining the DPP. 
 
PUBLIC RELATIONS PROBLEMS 
------------------------- 
7.  Mutharika's media honeymoon has clearly ended.  Contrary 
to initial statements,(reftel D), media freedoms under 
Mutharika have not dramatically increased; rather, it appears 
media freedoms have experienced something of a backslide. 
Following the arrest of three journalists for reports that 
allegedly caused embarrassment to the president (reftel E), 
Mutharika remained unapologetic and apparently unaware of the 
impact this action may have had on the public and on his 
political ambitions.  While some media organizations view the 
Mutharika Administration as being cut from the Muluzi mold, 
reporting on Mutharika, his administration, and the DPP 
remains largely balanced. The same cannot be said for TV 
Malawi and Malawi Broadcasting Corporation, Malawi's publicly 
owned television and radio stations.  These have largely 
followed the same traditions established under Banda and 
Muluzi, and function essentially as the mouthpiece of the 
Administration and the DPP.  Post will provide a media 
environment update septel. 
 
COMMENT 
------- 
 
8.  President Mutharika's performance during his first year 
has been mixed.  Since Mutharika took office, civil service 
and other government officials have been put on notice that 
they will be held to higher standards of professionalism and 
accountability.  The president has mandated monthly reports 
from his cabinet ministers; government employees are expected 
to report to work on time and be productive; buildings, roads, 
and public institutions are receiving long-needed 
improvements.  These changes are not insignificant and have 
sent a clear message that a government job comes with 
responsibilities, not just perks. 
 
9.  What Mutharika lacks in the ability to form a cohesive 
political strategy he makes up for in sheer courage in his 
departure from the hitherto omnipotent UDF.  Mutharika's 
genuine need for a political base led him to form the DPP, 
which has in turn, resulted in a loss of focus on his 
inaugural agenda.  However, the most significant problem with 
the formation of the DPP is in its timing.  It appears that 
the gargantuan task of engineering a new party, combined with 
the necessity of coddling potential opponents, may have 
hampered Mutharika's ability to produce more tangible results 
on the economy and corruption. 
 
10.  On corruption, the conviction of the former Mayor of 
Blantyre and recent arrest of a cabinet minister have breathed 
new life into the anticorruption campaign, which was in danger 
of atrophying due to lack of court convictions.  Economically, 
Mutharika has done well on managing public expenditure, but 
the business sector has begun to complain that he is too slow 
in implementing needed microeconomic reforms.  The economic 
outlook remains unpredictable and will depend on his ability 
to convince a touchy political class to support unpopular and 
painful economic reform. 
GILMOUR