VZCZCXYZ0007
RR RUEHWEB

DE RUEHAM #0573/01 0551159
ZNR UUUUU ZZH
R 241159Z FEB 08
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1867
INFO RUEHJM/AMCONSUL JERUSALEM 4873
RUEHTV/AMEMBASSY TEL AVIV 1034
RUEHDO/AMEMBASSY DOHA 0395
RUEHKO/AMEMBASSY TOKYO 0265
RUEHAK/AMEMBASSY ANKARA 0585
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS AMMAN 000573 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB AND NEA/ELA 
STATE PASS OPIC 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG OPIC JO KWBG
SUBJECT: OPIC CEO Reviews Projects Supporting King's Initiatives in 
Housing, Energy, and Water 
 
Ref: A) Amman 504 
     B) Amman 407 
     C) 07 Amman 2562 
 
¶1.  (SBU) Summary: OPIC President and CEO  Robert Mosbacher 
discussed ongoing and potential OPIC investments in Jordan worth 
$750 million with senior Jordanian officials  on the margins of the 
February 10-11 Middle East and North Africa Trade and Investment 
Conference held in Amman.  In 2007, OPIC helped finance five private 
equity funds, including one housing fund, and the first Independent 
Power Producer (IPP) project in Jordan (Ref A).  The agency is now 
interested in financing a mortgage facility, a second IPP, and the 
Disi water project (Ref C).  OPIC's projects target key priority 
areas for the Government of Jordan (GOJ) in housing, energy and 
water.  End Summary. 
 
 
GOJ Meetings with OPIC 
---------------------- 
 
¶2.  (U) To discuss ongoing and future OPIC projects in Jordan, CEO 
Mosbacher met February 10 jointly with Prime Minister Nader 
al-Dahabi and Minister of Industry and Trade Amer Hadidi, followed 
by February 11 meetings with  Minister of Planning Suhair al-Ali, 
Finance Minister Hamad Kasasbeh, Minister of Public Works and 
Housing Sahl Majali, Central Bank of Jordan (CBJ) Governor Umayya 
Touqan, and Jordan Investment Board CEO Maen Nsour.  He also met 
February 12 with Chief of the Royal Court Bassem Awadallah. 
 
2008: The Year of Housing 
------------------------- 
 
¶3.  (SBU) Awadallah highlighted that King Abdullah coined 2008 as 
"The Year of Housing" in Jordan.  Given rising fuel, food, and 
construction costs, he underscored the importance of providing 
affordable housing to Jordanian citizens, particularly government 
employees.  He said that the GOJ aimed to construct 200,000 new, 
affordable units over the next five to ten years, ranging from JD 
20,000 ($28,249) for an 80 square meters unit to JD 30,000 ($42,373) 
for a 120 square meters unit.  Awadallah clarified that the GOJ 
definition of "affordable" is no downpayment, and no more than JD 
100 ($141) per month deducted from an average JD 400-450 ($565-$636) 
government salary for mortgage costs. 
 
¶4.  (SBU) To help lower costs, Awadallah and Prime Minister Dahabi 
separately noted that GOJ has been considering three areas for 
possible government assistance: 1) providing state-owned land to 
developers free-of-cost for community complexes; 2) subsidizing the 
infrastructure; and/or 3) subsidizing the interest rate.  Mosbacher 
encouraged the GOJ to provide the land and help increase the return 
to developers so that public funds could go towards the initial 
downpayment, rather than having to subsidize the project throughout 
its life.  Awadallah said the key now is how the GOJ can afford such 
a subsidy.  Additionally, he expected criticism from some camps that 
the government, having just eliminated fuel subsidies, was now 
adding a new subsidy for housing to an already strained budget (Ref 
B). 
 
OPIC Proposing a Mortgage Facility 
---------------------------------- 
 
¶5.  (SBU) Supporting the King's housing initiative, OPIC already 
invested $60 million in 2007 in an International Housing Sector Fund 
(IHS) to support affordable housing projects in Jordan.  OPIC is now 
exploring with the GOJ a second project to provide mortgage finance 
for eventual homeowners, specifically in the public sector. 
 
¶6.  (SBU) The OPIC proposal entails a 25-year, $250 million loan at 
a fixed rate to a U.S. small business, such as the Iraq Middle 
Market Development Foundation (IMMDF) or the Middle East Investment 
Initiative (MEII) in partnership with the Cooperative Housing 
Foundation (CHF).  NOTE: OPIC needs to partner with U.S. entities in 
order to provide the financing for mortgages.  END NOTE.  IMMDF or 
MEII, in turn, would extend loans of $83.3 million each to three 
commercial banks in Jordan, potentially the three largest which have 
expressed interest in the project - Arab Bank, Cairo Amman Bank, and 
the Housing Bank for Trade and Finance.  As OPIC lends in dollars, 
the three banks, in turn, would enter into a long-term swap with the 
Central Bank of Jordan (CBJ) to obtain the needed Jordanian Dinars 
(JD).  Each bank would use the funds to make mortgage loans of about 
1.5% to 2% above the rate provided by CBJ. 
 
 
¶7.  (SBU) During a joint meeting with Finance Minister Kasasbeh, 
Minister of Public Works and Housing Majali, and CBJ Governor 
Touqan, Mosbacher and VP for Structured Finance Robert Drumheller 
negotiated some of the remaining issues with the mortgage facility 
proposal.  Touqan noted that CBJ still needs to examine the legal 
and technical terms of the swap, as most of swaps are currently only 
done for one to 12 months maximum.  All agreed that such short-term 
swaps would be subject to undesirable exchange rate fluctuations, 
which would need to be borne by some entity.  CBJ also noted that if 
the dinar were to be unpegged from the dollar and the dinar 
depreciated, the CBJ might become exposed.  NOTE: Despite this 
caution, CBJ officials have repeatedly asserted that Jordan has no 
plans to end the dinar-dollar peg.  END NOTE.  Indicating that the 
GOJ also aimed for a 3.5 - 4% interest rate for homeowners, the GOJ 
officials agreed to work with OPIC to persuade the commercial banks 
to provide the lowest spread possible. 
 
¶8.  (SBU) GOJ officials greatly appreciated the OPIC mortgage 
facility as a timely proposal given Jordanian priorities, and 
promised a quick response to finalize it.  OPIC hopes that the 
project will receive its board approval in April, with the goal of 
announcing the project at the OPIC May 5-7 "Access to Opportunity in 
the Middle East" International Investment Conference in Jordan. 
 
OPIC Support for Regional Energy Initiatives 
-------------------------------------------- 
 
¶9.  (SBU) Referring to OPIC's $70 million investment in the  370 
megawatt gas-fired IPP in al-Manakher currently being constructed by 
AES/Mitsui, Mosbacher expressed to Awadallah and Prime Minister 
Dahabi OPIC's desire to be part of the GOJ's second IPP project, and 
hope that AES would again be involved.  He raised concerns with GOJ 
interlocutors, however, that the same GOJ consultant who had 
provided bad advice on "force majeure" issues during the first IPP 
was giving the same poor advice for the second IPP.  Given that 
those issues had been resolved during the first project, he noted 
that there was no reason to deviate from the first IPP formula. 
Both Awadallah and Dahabi assured that they would look into the 
matter with the Ministry of Energy and Mineral Resources, and absent 
any new concerns, would resort back to the original IPP template. 
 
¶10.  (SBU) In a February 11 meeting with Palestinian Minister of 
Planning Samir Abdullah, Mosbacher noted that OPIC had experience 
helping Jordan finance its IPP.  Abdullah commented that one of the 
greatest needs in the Palestinian territories was generating 
electricity, particularly in the Japanese-proposed "Peace Corridor," 
and promised to send OPIC statistics on electricity requirements. 
When asked whether the Palestinian territories had a natural gas 
source, Abdullah speculated that Qatar might be able to provide 
natural gas for a gas-fired plant, given the country's large 
reserves.  Abdullah also questioned whether it would be possible to 
do a joint Jordanian-Palestinian power plant. 
 
Disi Water Project 
------------------ 
 
¶11.  (SBU) Mosbacher assured Awadallah of OPIC's commitment to work 
with the Turkish GAMA Enerji company on the Disi Water Conveyance 
project, but also acknowledged the need for the GOJ to work on water 
reform.  OPIC's $250 million contribution for Disi would be matched 
by $250 million from the International Finance Corporation (IFC) of 
the World Bank Group.  Mosbacher noted that General Electric (GE) 
had gained a 49% interest in GAMA Enerji, and would bring expertise 
and discipline to the project.  OPIC hopes to get board approval of 
the project in April, which Prime Minister Dahabi confirmed was also 
the GOJ timeline. 
 
¶12. (U) OPIC cleared this message, which was also coordinated with 
Consulate General Jerusalem. 
 
Visit Amman's Classified Web Site at 
http://www.state.gov.sgov.gov/p/nea/amman/ 
 
HALE