VZCZCXRO0398
OO RUEHROV
DE RUEHJM #0490/01 0801229
ZNR UUUUU ZZH
O 201229Z MAR 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0925
INFO RUEHXK/ARAB ISRAELI COLLECTIVE IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 02 JERUSALEM 000490 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FROM CONSUL GENERAL WALLES FOR U/S JEFFERY AND DIRECTOR FORE 
NEA FOR A/S WELCH; EEB FOR DIBBLE 
DEPT PLEASE PASS TO OPIC FOR ROBERT MOSBACHER 
 
E.O. 12958: N/A 
TAGS: EINV ECON EFIN KWBG
SUBJECT: OPIC'S PROPOSED HOUSING MORTGAGE FACILITY A 
CRITICAL ELEMENT IN ADVANCING U.S. OBJECTIVES 
 
REF: A. STATE 25706 
     ¶B. STATE 25604 
     ¶C. 07 JERUSALEM 1575 
 
¶1. (SBU)  I appreciate the opportunity to offer my strong 
support for OPIC's proposed mortgage finance facility for the 
West Bank prior to the OPIC Board's consideration of the 
initiative this week.  We have supported OPIC's efforts to 
advance this project since it was first proposed in mid-2007. 
 Given the unequivocal support for the project from the most 
senior levels of the Palestinian Authority (PA), including 
President Abbas (Abu Mazen), and from significant Palestinian 
private sector developers, I believe the initiative could 
have a critical economic and political impact in support of 
our objective of building the infrastructure for a 
Palestinian state as part of President Bush's effort to 
resolve the Israeli-Palestinian conflict.  More generally, 
OPIC's energetic engagement in Palestinian economic issues, 
including through the loan guarantee program signed last 
summer, has been a tangible demonstration of USG support for 
the government of Prime Minister Fayyad. 
 
¶2.  (SBU) Senior PA officials, including Abu Mazen and 
Fayyad, have repeatedly expressed to me their support for 
OPIC's initiative. On February 19, Abu Mazen wrote to 
Secretary Rice in support of OPIC's contribution to the 
 
SIPDIS 
mortgage finance initiative and urged the Secretary to 
support OPIC's involvement in the program in partnership with 
the Palestine Investment Fund (PIF).  Fayyad has also 
expressed his strong support for the project to OPIC 
President Mosbacher.  Both Abu Mazen and Fayyad have asked 
OPIC to establish the initiative early in 2008, as a catalyst 
for the Bethlehem Investment Conference, which the USG is 
aggressively supporting.  While the actual disbursement of 
funds from this initiative may take place over the medium and 
long-term, prominent Palestinian developers have told us and 
OPIC that approval of the proposal will serve as a catalyst 
for their own development initiatives in the more immediate 
future. 
 
¶3.  (SBU) The proposal has already garnered support from 
others, including Quartet Representative Blair, who 
successfully lobbied London to secure UK (DFID) support for 
the project.  We have (Ref B) urged Gulf States to contribute 
to the program.  In addition, the mortgage facility is among 
the proposals being promoted through the Secretary's 
U.S.-Palestinian Public-Private Partnership Initiative.  The 
IFC's willingness to contribute is a significant signal of 
its return to the Palestinian economic scene, which the USG 
has been encouraging in recent months. 
 
¶4.  (SBU) OPIC has, since beginning discussions on this 
initiative in mid-2007, consulted closely with public and 
private sector Palestinian officials.  OPIC and PIF met and 
corresponded regularly with the PA's Capital Market Authority 
(CMA) and provided expert legal counsel to assist the CMA in 
completing its earlier efforts to update and modernize the 
regulatory framework governing mortgage financing in the West 
Bank and Gaza.  We agree with OPIC, PIF, and The Cooperative 
Housing Foundation (CHF) assessments that a significant and 
growing demand for affordable housing in the West Bank is not 
being met and long-term mortgage financing is generally not 
available to Palestinians. 
 
¶5. (SBU) The PIF, having been criticized for paying too much 
attention to overseas investments, has increasingly focused 
on investments in the West Bank, particularly those designed 
to stimulate Palestinian economic growth.  The OPIC-PIF-Aspen 
loan guarantee facility, announced by the President and 
signed in July 2007 (Ref C), is expected to support up to USD 
20 million in loans to SMEs by the end of 2008.  The PIF is 
also involved in the Gaza Marine Gas project, the 
establishment of a second cellular phone company (Wataniya), 
and multiple industrial estate proposals.  Post is aware that 
in conjunction with litigation against the PA and PLO in the 
U.S., PIF assets have been attached in judgments.  However, 
those actions have not precluded previous OPIC involvement 
with PIF, including the loan guarantee program noted above. 
If we cannot work with the PIF, virtually no USG support will 
be available for large scale private sector activities here. 
 
¶6.  (SBU) Post has no reason to believe that the potential 
investors (listed Ref A, para 2) have any ties to terrorism, 
money laundering, corruption or other violations of the law, 
though we understand that OPIC will not enter into a 
financial commitment until after satisfactorily completing 
 
JERUSALEM 00000490  002 OF 002 
 
 
the appropriate level due diligence. 
 
¶7. (SBU) OPIC has invested a significant amount of work on 
this initiative over the past seven months.  I urge you to 
lend your full support to the program and OPIC's efforts to 
maintain hard-won momentum at this critically time. 
WALLES