This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 KUWAIT 003316 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EFIN PREL PGOV KU IZ
SUBJECT: KUWAIT FORMS HIGH-LEVEL IAWG TO EXPLOIT GOVERNMENT 
AND PRIVATE-SECTOR DEVELOPMENT OPPORTUNITIES IN IRAQ 
 
REF: A. KUWAIT 3266 
 
     ¶B. STATE 206458 
 
¶1.  Summary.  Kuwait has inaugurated a high-level interagency 
working group to coordinate government and private sector 
programs for participation in the reconstruction of Iraq. 
Embassy and GOK interlocutors see this development as an 
excellent opportunity to promote the economic and regulatory 
reforms essential to attracting non-energy related investment 
to Kuwait.  End Summary. 
 
¶2.  Ref B note verbale invited the GOK to designate a 
representative for appointment to the Council for 
International Cooperation (CIC) in Iraq.  CIC was created 17 
June under Regulation No. 5 issued by the Administrator of 
the Coalition Provisional Authority (CPA) to facilitate 
greater international involvement in the CPA,s funding and 
operations. 
 
¶3.  Embassy strongly endorses CPA,s decision for Kuwaiti 
participation in the CIC.  We view that offer as perhaps an 
important opening for the sui generis economic reform we push 
for in Kuwait as well as a useful tool in our post-war 
bilateral political kit.  In the weeks prior to the CPA,s 17 
July formal request, EconChief met with key private sector 
and government officials at the working and policy levels who 
then already were evaluating the potential for Kuwaiti 
collaboration with the CPA in Iraq. 
 
¶4.  The concept of direct, private-sector Kuwaiti involvement 
we have promoted has resonated nicely at our post-election 
meetings with such interlocutors as Minister of Finance 
Mahmoud Al-Nouri; Ministry of Finance Asst. U/S for Economic 
Affairs Mustafa Al-Shamali; Ministry of Finance Asst. U/S for 
Financial Affairs Fawzi Al-Qassar; Higher Committee for 
Economic Development and Reform Secretary General Fawzi 
Al-Sultan; Kuwait Investment Authority Managing Director 
Ahmad Bastaki; Central Bank Manager for Inspections and 
Licensing Yaqoub Al-Ebrahim; Mr. Waleed Al-Humaidhi, member, 
Kuwaiti Chamber of Commerce and Industry.  Indeed, very 
senior members of the new 5 July government have promoted the 
idea of considering a market-oriented development plan for 
Kuwait.  In these public discussions, private sector 
opportunities in Iraq frequently have surfaced as a potential 
vehicle for such reform. 
 
¶5.  Kuwait,s continuing behind-the-scenes action and 
interest in developing the Iraqi market is substantive and 
impressive.  Several of our para 5 interlocutors played key 
roles in the GOK,s interagency &brainstorming8 discussions 
held during May and June to evaluate private sector 
opportunities in Iraq.  By 10 July, the group had been vetted 
personally by Prime Minister Sheikh Sabah and formally 
charged with continuing to plan a role for Kuwait,s 
parastatal and private sector participation in the rebuilding 
of Iraq.  A major impetus for this effort is the $37.5 
billion that the GOK quantifies as the minimum owed Kuwait by 
Iraq for pre-war loans; GOK oil sales on behalf of Iraq 
during the Iran/Iraq War; and previously agreed, but still 
unpaid compensation claims. 
 
¶6.  The Kuwaiti IAWG is tentatively titled, Work Team to 
Support the Construction of Iraq (Work Team).  Its 
institutional members include: the Public Authority for 
Compensation; Kuwait Investment Authority; Kuwait Petroleum 
Corporation; Kuwait Fund; the Arab Fund; Kuwait Chamber of 
Commerce and Industry; Secretariat General of the Higher 
Committee for Economic Development and Reform.  This Work 
Team has developed under the direction of now Minister of 
Foreign Affairs/Acting Minister of Social Affairs Sheikh Dr. 
Mohammed Sabah Al-Salem Al-Sabah who chaired the Team,s 
first plenary session on 16 June.  The Secretariat General of 
the Higher Committee for Economic Development and Reform 
(Reform Committee) coordinates Work Team's day-to-day 
operations effectively. 
 
¶7.  EconChief met 16 July with Reform Committee Secretary 
General Fawzi Al-Sultan, for a read out on the Work Team,s 
progress.  SecGen Fawzi launched into an upbeat staccato 
presentation, noting that his agency considers the market 
potential of Iraqi as Kuwait,s &best bet to roll the wheels 
of economic reform.8  He said it,s the GOK,s official (in 
public and private) expectation that under CPA,s tutelage, 
Iraq could emerge from its present troubles a strong, 
democratic and market-oriented society.  His group had, he 
noted, debated thoroughly a draft set of strategies on how 
best to capitalize on an anticipated CPA success in Baghdad. 
 
¶8.  Fawzi concurred that the following areas are ripe for 
reform in Kuwait:  intellectual property rights; greater 
acceptance/implementation of WTO; tax law transparency with 
across-the-board equality in treatment; expedited 
administrative procedures for imports, exports and company 
registrations; and streamlined licensing regimes.  He agreed 
that a suitable framework for addressing these issues 
deliberately could start at the working level with renewed 
discussions on Double Taxation, BIT and TIFA agreements. 
 
¶9.  Fawzi volunteered that Kuwait,s size of the Iraq 
reconstruction pie necessarily would depend on successful 
reform of Kuwait,s present and trade-inhibiting regulatory 
structures.  He said he would urge GOK to take the necessary 
steps.  (Septel describes our initial meeting with Ministry 
of Finance officials regarding a Double Taxation Treaty.) 
 
¶10. The SecGen next listed Iraq market opportunities his team 
had identified as potentially advantageous to Kuwait in a 
CPA-regulated trade regime.  Even minor successes in these 
areas, he asserted, would facilitate the task of moving 
forward on reform: 
 
--  Private Sector: Private security services, 
transportation/marketing services; catering and food 
production; mobile telecommunications systems; housing and 
tourism. 
 
--  Public Sector:  Passenger air traffic to Baghdad via 
Kuwait flag carrier; provision of emergency medical services; 
police training; development of border security regime; 
integration of Kuwait/Iraq power grids for load-sharing; 
development of a joint port authority; Free-Trade Zones; 
development of Iraq gas reserves; bank supervision and 
licensing; securities market and exchange operations. 
 
¶11. Comment.  Publicly and privately, the GOK is making the 
right sounds and moving in the right direction with intent 
and deliberation it seems.  How committed domestic power 
brokers are to the substantial reform needed to make Kuwait 
more attractive for investors and competitive in non-energy 
industry remains unclear, however.  In our conversations with 
knowledgeable sources, we hear that much will depend on the 
reception the GOK and Kuwaiti private sector entrepreneurs 
receive in Baghdad.  Some national pride, and a lot of money 
will be riding on the efforts of the Work Team to Support the 
Construction of Iraq.  Kuwaitis are concerned that changes in 
the U.N. compensation fund, a re-structuring of payments on 
Iraqi,s debt to Kuwait and anticipated Kuwaiti contributions 
to a donor countries, reconstruction program for Iraq, will 
affect Kuwait adversely.  In compensation, Kuwait can be 
expected to seek a major role for its private sector and 
parastatals in rebuilding Iraq.  End Comment. 
 
¶12.  Minimize considered. 
JONES