VZCZCXRO2238
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK RUEHROV
DE RUEHGB #2200/01 1841216
ZNR UUUUU ZZH
P 031216Z JUL 07
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 2017
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 03 BAGHDAD 002200 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAGR IR IZ
SUBJECT: PRT TIKRIT: SALAH AD DIN LEADERS FACE TOUGH ECONOMIC 
QUESTIONS 
 
REF: BAGHDAD 996 
 
 
¶1. This is a PRT Tikrit, Salah ad Din cable. 
 
¶2. This is the first of two cables regarding the Salah ad Din 
Business Investment Conference. 
 
¶3. Sensitive but unclassified, entire text. 
 
¶4. SUMMARY.  The Governor of Salah ad Din hosted a gathering of over 
100 public and private sector leaders for a Business and Investment 
Conference at Tikrit University on June 23.  Ground-breaking due to 
its size and scope, the conference provided provincial leaders an 
opportunity - in the national spotlight - to outline a vision of 
economic growth for the province.  While no panaceas were announced, 
and an infusion of foreign capital into SaD is probably not 
imminent, the meeting provided provincial leaders a platform to 
offer a message of hope to a downtrodden populace.  Most 
importantly, the event helped to further legitimize in the public's 
eye a government increasingly adept at exploiting the power of the 
media.  END SUMMARY. 
 
--------------------------------------- 
A New Economic Approach in Salah ad Din 
--------------------------------------- 
 
¶5. A former military and governmental stronghold under the previous 
regime, Salah ad Din (SaD) is home to an economy gutted by 
de-Baathification and a weak, underdeveloped private sector, even 
when measured by Iraqi standards (reftel).  The chief impediments to 
economic growth - the lack of access to capital, a challenging 
security situation, dilapidated infrastructure, regulatory and 
bureaucratic hurdles to registering a business, and chronic 
inflation - hardly, if at all, improved in 2006-2007.  Moreover, 
many of these challenges lie outside of the purview of provincial 
governance. 
 
¶6. Instead, the conference represented a growing awareness by 
provincial leaders that the future of SaD depends - not upon 
governmental subsidies and state-owned enterprises - but instead on 
foreign and domestic investment.  (NOTE: In being dominated by 
officials with ties to the old regime, SaD is certainly not alone. 
However, the lack of private sector experience in the upper echelon 
of government (the Governor was a schoolteacher, the Deputy Governor 
a Brigadier General) may have led provincial leaders to often view 
the private sector as a threat to their power base.  As a result, 
the public and private sector rarely communicate here, with the 
business community largely isolated from the provincial decision 
making process, reftel. END NOTE.)  Critically, the conference 
discussion did not degenerate - as it often does - into a "gripe 
session" revolving around corruption at the Bayji oil refinery and 
the consequent shortages of refined fuel. 
 
¶7. Consistent with the expectation that the national investment law 
will mandate a business investment committee seated in each 
province, the Governor announced the formation of a group that would 
"oversee investors in Salah ad Din and send me (the Governor) 
recommendations."  The Governor also announced that the committee 
would consist of twelve members.  However, balance yet may be an 
issue - only two of the twelve were from the business community - 
the rest members of the Deputy Governor's inner circle. 
 
------------ 
A Better Mix 
------------ 
 
¶8. Previous economic conferences in October 2006 and March 2007 here 
were usually governmental or private sector and academia - but not 
both.  On June 23, SaD Governor Hamad Hamoud al Shakti invited 315 
delegates to discuss a varied agenda of topics, ranging from the new 
national investment law, to the (admittedly weak) level of SaD 
business competitiveness.  Although the conference was held on a 
Saturday closely following several CF operations - likely 
discouraging attendance - approximately 140 delegates attended the 
event.  Most importantly, the mix of delegates was robust; about 65 
attendees represented the government, 35 from academia, and 
approximately 55 from the private sector.  The Governor provided the 
highlight of the conference by stating, "We (the provincial 
government) reach out to the private sector to create hope for the 
people." 
 
-------------- 
Security First 
-------------- 
 
¶9. Significantly, provincial leaders - especially the Deputy 
Governor - accepted responsibility for the unstable security 
situation in Salah ad Din, agreeing that there could be no economic 
development without stability.  The Deputy Governor declared that 
 
BAGHDAD 00002200  002 OF 003 
 
 
"security is the foundation of economic growth, and we assure any 
investor that we will provide it for them."  The ability of the 
provincial government to fulfill the assurance notwithstanding, the 
governor's message was unequivocal. 
 
------------------- 
"More Hope in Doha" 
------------------- 
 
¶10. It would be premature to recast SaD provincial leaders as 
enthusiastic, budding capitalists.  In other provincial issues such 
as security and budget execution (septel) the tendency to 
(over)centralize authority in Tikrit usually rules the day 
(sometimes in spite of the best efforts of the PRT).  If a Sunni 
government held power in Baghdad, the same approach likely would be 
applied to economic growth.  However, increasingly - as hopes for 
reconciliation fade here - a sobering reality appears to be setting 
in.  This sentiment was reflected by Deputy Governor Abdullah in an 
interview with IPAO on June 21, "We have more hope in our people in 
Doha or Dubai than in Baghdad."  The message for SaD leaders is 
clear: attract investors from Dubai or Doha to the province before 
it is too late, for soon Salah ad Din will be on its own.  In this 
context, the oft-repeated request for an airport in Tikrit by 
provincial leaders is more easily understood. 
 
------------------ 
Tariffs, Please... 
------------------ 
 
¶11. The newfound commitment to the free market, however, did not 
preclude most speakers at the conference to call for stiff new 
duties on all imports at ports of entry.  The fact that many 
products are imported from abroad rankles provincial leaders and the 
general population alike; local farmers struggle while foodstuffs 
flow in from Iran and Turkey (the ultimate archenemy in the minds of 
many SaD residents). 
 
----------------------------------------- 
Local Business Competitiveness Questioned 
----------------------------------------- 
 
¶12. Most speakers questioned the competitiveness of businesses in 
SaD.  Significantly, the Provincial Council Chairman, Sheikh Rashid 
- one of the most conservative, nationalistic members of the council 
whose commitment to democracy, much less free markets, once appeared 
to be in question - strongly supported a future foreign economic 
presence in SaD.  Rashid also demonstrated a desire to encourage 
business reform through consolidation, streamlining, and increased 
competitiveness in SaD - if perhaps by the wrong method (government 
mandate rather than market forces) - by stating that "we (the 
provincial government) should reorganize the businesses of SaD by 
combining five into one." 
 
¶13. The business community in SaD is also hamstrung by rampant 
hostility between the two principal private sector organizations: 
the Businessman's Union and the Chamber of Commerce.  Driven by a 
personal feud between the two leaders, Raad al Ali, President of the 
Union, and Dhamer Muhklif, President of the Chamber of Commerce, the 
rival camps actually attempt to sabotage opposing group initiatives 
and investments in the province rather than supporting the business 
community as a whole. (NOTE: These institutions are also highly 
distrusted by the general population, as they were used as 
intelligence gathering organizations in the past. END NOTE.)  Deputy 
Governor Abdullah called them to task at the conference, however, 
stating that "The Chamber of Commerce doesn't do anything right now 
except print ID cards." 
 
------- 
Comment 
------- 
 
¶14. Tikrit will not be the next Dubai anytime soon.  The near-term 
value of the provincial government's outreach to the private sector 
and encouragement - however nascent - of foreign investment will 
likely be political rather than economic.  The advent of a business 
investment committee which can take steps towards the attraction of 
foreign investment - and coordinate USG initiatives (such as the 
Task Force for Improved Business and Stability Operations - Iraq 
project) - is a significant economic capacity building measure. 
However, the true value of the conference and the initiative from 
which it will hopefully spring was the message of economic growth 
and the hope of future prosperity.  This could be a powerful counter 
to the growing extremism here, especially given the provincial 
government's budding ability to utilize the provincial and even the 
national media.  The prospect of economic growth (dependent upon 
improved security) will also remain a valuable carrot which can be 
leveraged to encourage the provincial government to continue to take 
the difficult steps necessary to improve the security situation. The 
PRT will remain highly engaged on this critical issue throughout the 
summer/fall 2007.  END COMMENT. 
 
BAGHDAD 00002200  003 OF 003 
 
 
 
¶15. For additional reporting from PRT Tikrit, Salah ad Din, please 
see our SIPRNET reporting blog: 
http://www.intelink.sgov.gov/wiki/Tikrit.