VZCZCXRO9299
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #1239/01 1000732
ZNR UUUUU ZZH
R 100732Z APR 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0664
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 001239 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE BUT UNCLASSIFIED 
 
E.O. 12958:  N/A 
TAGS: ECON EFIN IZ
SUBJECT:  THE TRADE BANK OF IRAQ IN SULAIMANIYAH, IRAQI KURDISTAN 
 
REF: BAGHDAD 3812 
 
This is a Kurdistan Regional Reconstruction Team (RRT) cable. 
 
¶1.  (SBU) SUMMARY. The Sulaimaniyah Branch Manager of the Trade Bank 
of Iraq (TBI) wants decentralization of banking approval authority. 
He suggested that a local TBI branch be able to carry out payment 
transactions, grant loans and issue letters of credit.  He also 
recommended that the TBI branch have its own loan policy which would 
accommodate a wide range of clients to include the middle class and 
the need for smaller size loans.  The Chairman of the Sulaimaniyah 
Chamber of Commerce noted that the lack of an international banking 
system at the regional level has discouraged deposits and encouraged 
the operation of an unofficial dollar market.  END SUMMARY 
 
TRADE BANK OF IRAQ 
 
¶2.  (U) RRT Off met with Dlawar N. Mahmood, Sulaimaniyah Branch 
Manager of TBI on March 29.  By way of background, created in 
November 2003, TBI is owned by the Government of Iraq and receives 
technical and managerial support from an international consortium 
led by JPMorgan Chase.  TBI generates letters of credit for 
government ministries, provincial entities, private companies and 
state-owned enterprises.  TBI is the only corporate bank working 
with foreign banking institutions.  With its main office Baghdad, 
TBI opened a branch in Sulaimaniyah in September 2006.  Other TBI 
branches are located in Basrah, Baghdad and Irbil. 
 
CALL FOR A TBI REGIONAL BANK 
 
¶3.  (SBU)  Dlawar Mahmood stressed the need for the Sulaimaniyah 
branch of TBI to have full authority to do transactions, generate 
letters of credit, give loans, and be a member of the Society for 
Worldwide Interbank Financial Telecommunication (SWIFT). 
 
¶4. (SBU) He suggested having one of the TBI branches be a regional 
bank which would serve the Iraqi Kurdistan provinces but also 
clients from neighboring areas --Mosul, Kirkuk and Tikrit.  The TBI 
bank in Iraqi Kurdistan, he added, has the capability of assuming 
this role in terms of infrastructure and personnel.  And foreign 
companies operating in the region, for instance Italian and Canadian 
companies involved in the hydrocarbon sector, would greatly benefit 
from a regional bank with approving authority. 
 
CHANGE IN LOAN POLICY 
 
¶5.  (SBU) Dlawar Mahmood also recommended changing the loan policy 
of the TBI Sulaimaniyah bank branch.  He noted the need to lend to 
middle-class parties instead of limiting business to top corporate 
players.  The large clients do not help develop the private sector 
on a provincial level, he added.  Instead of lending one loan at ten 
million dollars, he noted, granting ten loans each at one million 
dollars would better promote economic growth and private sector 
business.  Mahmood admitted this requires more research into the 
clientele but his bank management is in a strong position to 
minimize those costs given their proximity to the clientele and 
local business knowledge. 
 
NEED FOR LIQUID CASH 
 
¶6.  (SBU) Mahmood emphasized the need for more liquidity in the 
market.  He noted, for example, that the agricultural sector was 
reduced to a minimum under the regime of Saddam Hussein and now 
needs cash to start again and modernize.  Although clients are 
forced to use the unofficial dollar market (reftel), most of them 
would prefer to use a bank to transfer money and carry out their 
investment activity.  In this respect, he noted clients operating in 
the region will be assured the money is clean.  As relations between 
the US and Iran are difficult, he added, all parties would benefit 
from the institutionalization of the dollar market the empowerment 
of local banks. 
 
RESORT TO THE DOLLAR MARKET 
 
¶7.  (SBU) Sirwan Haji M. Hawaey, a businessman and First Deputy of 
the Chamber of Commerce, Sulaimaniyah, noted he had tried to open a 
letter of credit through the current banking system and it took 
three months, incurred administrative costs, errors regarding the 
order, 100 percent deposit requirement and cuts taken by 
corresponding banks.  In the interest of time and effort, he 
canceled the letter of credit and resorted to the unofficial dollar 
market and put cash payment in a taxi to be taken across the Turkish 
border.  He remembered that during the Saddam regime, only five 
percent was required to take out a letter of credit, whereas now a 
100 percent deposit is necessary. 
 
VISA CARD 
 
¶8.  (SBU) As for the TBI Visa card, it is a debit card, Mahmood 
clarified.  It is printed in the United Kingdom and approved in 
Baghdad.  There are two ATM machines in Sulaimaniyah, one at the 
 
BAGHDAD 00001239  002 OF 002 
 
 
airport and one at the TBI Sulaimaniyah bank branch.  There is a 
plan to put an ATM in two up-scale hotels in Sulaimaniyah. 
 
NEED TO PROMOTE SMALL BUSINESS 
 
¶9.  (SBU)  The Chairman of the Chamber of Commerce, Hassan Hawrami, 
echoed statements made by Mahmood with respect to promoting private 
local banks.  Hawram underscored the need to encourage small project 
loans to local businesses.  For economic development, he said that 
the six local banks operating in Sulaimaniyah need to increase their 
capacity to attract clients.  Hawrami recommended local private 
banks enter into joint ventures with foreign companies and be able 
to function with approving authority and serve a wide range of 
clients including middle-class clients with small projects. 
 
PROMOTE PRIVATE SECTOR INVESTMENT 
 
¶10.  (SBU) The Chairman of the Chamber of Commerce suggested to RRT 
Off that an international bank be established in Iraq and operate 
independently of the central government.  Hawrami also noted that if 
redundant and excess government employees were moved out of their 
positions into the private sector, this would promote economic 
growth.  It is important, he added, to teach the government 
employees a new profession through training programs before 
transferring them from the public to the private sector and into 
fields such as agriculture, industry and tourism. 
 
COMMENTS 
 
¶11.  (SBU) A regional branch of TBI with approving authority would 
be effective for promoting direct foreign investment and for 
improving risk assessment of local clientele.  In light of a limited 
banking culture, currently the average client uses the bank as a 
cash box or for currency conversion only.  And as the dinar is 
getting stronger, clients are more hesitant to deposit their money 
in banks.  This contributes to a pent-up demand for credit. 
 
¶12.  (SBU) Both government and privately owned banks are frustrated 
with the centralized banking system.  Centralizing approval 
authority is intended to alleviate concerns over money laundering. 
However, it has the effect of squeezing out middle-class clients and 
small businesses which can contribute to private sector growth.  The 
lack of regional or provincial authority in the banking system is a 
disincentive to deposit funds and contributes to the development of 
an informal dollar market that has no official controls.  Regional 
and provincial banks have the know-how to loan to lend funds to 
creditworthy local businesses and monitor their risks more than 
banks in Baghdad.