VZCZCXRO5303
PP RUEHDE RUEHDIR
DE RUEHMK #2046/01 3481329
ZNR UUUUU ZZH
P 141329Z DEC 06
FM AMEMBASSY MANAMA
TO RUEHC/SECSTATE WASHDC PRIORITY 6187
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEATRS/TREASURY DEPT WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFIUU/HQ USCENTCOM MACDILL AFB FL PRIORITY
RHBVAKS/COMUSNAVCENT  PRIORITY

UNCLAS SECTION 01 OF 03 MANAMA 002046 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP, EB/CBA 
STATE PASS USTR FOR J BUNTIN 
COMMERCE FOR 4520/ITA/MAC AND OGC/CLDP 
TREASURY FOR JROSE 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV PREL BEXP BA BILAT ECTRD
SUBJECT: U.S.-BAHRAIN FTA: TRADE, INVESTMENT BOOMING, BUT 
PRIVATE SECTOR UNSURE OF PATH AHEAD 
 
REF: A. MANAMA 1956 
     ¶B. MANAMA 1700 
     ¶C. 05 MANAMA 1919 
 
Sensitive but unclassified; please protect accordingly.  Not 
for Internet distribution. 
 
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SUMMARY 
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¶1. (SBU) The U.S. - Bahrain Free Trade Agreement (FTA) 
entered into force on August 1, 2006 amid a period of booming 
U.S. trade with the region.  A number of U.S. companies, 
including Tactics Middle East, Microsoft, Westpoint Home, 
Kraft, and others have announced substantial new ventures, 
many of them directly related to the FTA.  The Bahraini 
Economic Development Board (EDB) and the Embassy are each 
working to track and respond to commercial inquiries related 
to the FTA.  U.S. and Bahraini government officials have 
taken steps to support the FTA's implementation and encourage 
its success.  However, the GOB continues to rely upon the USG 
and AmCham for guidance.  The Bahraini business community is 
beginning to understand that the onus ultimately rests with 
it to secure the benefits of the Gulf's first FTA.  End 
Summary. 
 
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TRADE DATA 
---------- 
 
¶2. (U) The U.S. - Bahrain Free Trade Agreement entered into 
force on August 1, 2006.  U.S. domestic exports to Bahrain 
during the first three months of FTA implementation (August 
through October) were up 58.8 percent compared to the same 
period in 2005.  January through October 2006 exports totaled 
$395 million, an increase of 51.6% compared with the same 
period in 2005.  This exceeds the growth rate of total U.S. 
domestic exports to the rest of the Gulf (Kuwait, Oman, 
Qatar, Saudi Arabia and the United Arab Emirates) through 
October, which reached 41.9%.  The growth in U.S. exports to 
Bahrain was broad-based, covering traditional product lines 
like vehicles, aircraft and parts, and electrical and 
mechanical machinery. 
 
¶3. (U) U.S. imports from Bahrain during the first three 
months of FTA implementation were down 5.25%, due mainly to a 
decline in U.S. imports of Bahraini textiles and unusually 
high U.S. purchases of fertilizer and petroleum in October 
¶2005.  However, U.S. imports from Bahrain for January through 
October totaled $536 million, an increase of 50.8% compared 
with the same period in 2005.  This compares to the growth 
rate in total U.S. imports from the rest of the Gulf of 20.6% 
through October.  U.S. imports from Bahrain grew mostly as a 
result of a new aluminum production line coming into service. 
 
 
------------ 
NEW VENTURES 
------------ 
 
¶4. (SBU) U.S. firm Westpoint Home announced December 5 that 
it had finalized negotiations to acquire three of Manama 
Textiles' four divisions for an undisclosed sum, which 
officials privately place at between $100 and $200 million 
(Please protect as business proprietary information).  Manama 
Textiles CEO Hamid Nishat told the Ambassador that the 
recently-implemented FTA had been a significant incentive to 
Westpoint Home.  Manama Textiles exports 75% of its 
production to the U.S.  Under the FTA, these exports are now 
duty-free. 
 
¶5. (U) The Ambassador attended the official ground-breaking 
ceremony for Kraft Foods' $40 million cheese and beverage 
plant December 6.  The 600,000 square foot factory, which 
will employ 250-300 workers, is due to be completed in 2007 
and will produce cheese and powdered beverages for export in 
the region. 
 
¶6. (SBU) Microsoft recently decided to relocate its MENA 
region headquarters from Turkey to Bahrain.  Country Manager 
Sherif Bayoumi said Microsoft had selected Bahrain for its 
 
MANAMA 00002046  002 OF 003 
 
 
favorable investment climate and regionally competitive cost 
of living.  He noted that EDB had done everything in its 
power to facilitate Microsoft,s decision. 
 
¶7. (SBU) Arcapita, Investcorp and Kuwait Finance 
House-Bahrain (KFH) each hold a number of U.S. investments 
and are open to considering more.  KFH-Bahrain Project 
Development Manager Osama Al Khajah told EconOff November 16 
that Second Deputy Chairman Waleed Rashdan had traveled to 
Colorado October 22 at the invitation of Bahraini Ambassador 
Nasser Belooshi to study renewable energy-related joint 
venture opportunities (Please protect as business proprietary 
information). 
 
¶8. (U) Tactics Middle East (TME) CEO Scott Revell announced 
plans July 29 to build a $60 million car parts factory in 
Bahrain, employing 100 workers.  In addition to the 
availability of affordable aluminum, Revell cites the FTA as 
a draw for investment in Bahrain.  Revell has said he 
expected to begin exporting Bahrain-made products to the U.S. 
in 2007. 
 
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INQUIRY TRACKING 
---------------- 
 
¶9.  (SBU) Post's Econ/Commercial Unit currently records an 
average of thirty FTA-related inquiries per week from U.S. 
and/or Bahraini entities. These calls range from questions 
regarding specific FTA provisions to entrepreneurs seeking 
joint-venture partners.  Many of these calls reflect 
inadequate understanding regarding international trade. 
Typical are questions such as, "How can I use the FTA to 
start a business in the U.S.?" 
 
¶10. (SBU) The EDB plans to compile and consolidate the 
FTA-related inquiries that it currently receives, as well as 
those received by other governmental offices, including the 
Ministries of Industry and Commerce, Finance, and the Central 
Bank.  Post will add the GOB,s figures to our database. 
 
------------------------------- 
ACTIVITIES/PROMOTIONS/REACTIONS 
------------------------------- 
 
¶11. (U) The International Executive Service Corps implemented 
a three-part MEPI-funded program from May through November 
2006 to educate Bahraini entrepreneurs regarding export 
technicalities including customs regulations and procedures, 
shipping procedures, marketing strategies and e-business 
practices. 
 
¶12. (SBU) Deputy Assistant Secretary of Commerce Vineyard's 
visited Bahrain September 12 - 14 to celebrate the 
implementation of the FTA (Ref. B).  Vineyard told audiences 
that the agreement enables the bilateral commercial 
relationship to catch up to the long-standing strategic 
relationship, noting that two-way trade could exceed $1 
billion for the first time in 2006.  During the visit, 
Minister of Industry and Commerce Hassan Fakhro stressed that 
King Hamad is fully committed to the FTA and the bilateral 
relationship.  He cautioned that Bahraini firms would have to 
improve the quality of their products to penetrate the 
American market, and hoped that U.S. companies investing in 
Bahrain would share their technology, training, and 
management expertise.  EDB Deputy CEO Hejres pledged a "fast 
track, transparent process" for Americans investing in 
Bahrain.  Several interlocutors identified the need for 
further outreach and education on the FTA so that the 
benefits of the agreement are spread throughout the business 
sector. 
 
13 (U) The Ambassador delivered the keynote address at an 
AmCham luncheon November 2 before an audience of over 100 
guests and reporters in which he urged Bahrainis to work with 
American companies to benefit from the FTA.  The Ambassador 
shared his observations following his return from a four-city 
Ambassadors' tour in the U.S. to promote trade with the 
Middle East.  He noted that business is booming between the 
United States and the Middle East and that while Bahrain is 
currently doing well, Bahrainis would have to compete 
aggressively to maximize Bahrain's share of trade 
 
MANAMA 00002046  003 OF 003 
 
 
opportunities. 
 
¶14. (U) In an AmCham-sponsored FTA promotional breakfast 
November 16, Commerce Assistant Secretary for Market Access 
and Compliance Bohigian said the U.S. welcomes Bahraini 
investment and noted that the majority of American foreign 
trade takes place with our FTA partners.  He called on the 
business community to pursue the full benefits of the FTA in 
the interest of furthering "friction-free" trade in Bahrain 
and the region. A/S Bohigian responded to questions from the 
audience following his remarks.  As was the case during 
Commerce Deputy Assistant Secretary Holly Vineyard's visit, 
several questions illustrated an ongoing desire among many in 
the local business community for specific guidance on 
benefiting from the FTA (Ref. A). 
 
¶15. (SBU) The AmCham is planning a trade mission to the 
United States to raise Bahrain's profile with American 
businesspeople, reportedly in February or March 2007.  The 
EDB is expected to participate and there is speculation that 
the Crown Prince will participate in at least a part of the 
trip. 
 
¶16. (SBU) The Economic Development Board and the Bahrain 
Chamber of Commerce and Industry formed the Bahrain FTA 
Implementation Committee (FTAIC) December 2005 to develop a 
strategy for maximizing the benefits of the FTA. (Ref. C). 
The FTAIC has since reached out to various entities, 
including the Bahrain Businesswomen's Society and the AmCham 
to ensure an inclusive effort.  The FTAIC November 12 signed 
a memorandum of understanding with the National U.S.-Arab 
Chamber of Commerce to promote the FTA.  However, the FTAIC 
has been criticized as being long on ceremony and short on 
substance.  One EDB official recently told EconOff that EDB 
will look increasingly to the AmCham and the USG to help 
point the way. 
 
********************************************* ******** 
Visit Embassy Manama's Classified Website: 
http://www.state.sgov.gov/p/nea/manama/ 
********************************************* ******** 
MONROE