VZCZCXRO4672
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #1061/01 0980207
ZNR UUUUU ZZH
R 070207Z APR 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 6687
INFO RUCNRAQ/IRAQ COLLECTIVE
RUCPDC/USDOC WASHDC

UNCLAS SECTION 01 OF 03 BAGHDAD 001061 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
USDOC for 4530/ITA/MAC/IIRTF/SHAMROCK 
USDOC for 3131/ITA/USFCS/RD/ANESA/GLOOSE 
USDOC PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EAID EFIN EINV EAGR ENRG BEXP IZ
SUBJECT: Dialogue on Economic Cooperation -- Follow-up 
 
REF: (A) STATE 24866, (B) BAGHDAD 789, (C) BAGHDAD 643 
 
¶1. (SBU) SUMMARY: Deputy Prime Minister (DPM) Barham Salih's 
follow-up team for the Government of Iraq (GOI) hosted U.S.-Iraq 
Dialogue on Economic Cooperation (DEC) of February 27-28 have 
proposed to pursue implementation of actionable outcomes by breaking 
action items into functional groups.  Once the division of labor is 
agreed, the DPM will then issue a directive with specific tasks to 
the High Economic Committee Secretariat within the Iraqi Council of 
Ministers (CoM).  We have agreed to forward this proposal to 
Washington while the GOI's team vets it with the DPM.  END SUMMARY. 
 
---------------------- 
Functional Groups and 
Action Items 
---------------------- 
 
¶2. (SBU) The Government of Iraq (GOI) hosted the U.S. Government 
(USG) in Baghdad February 27-28, 2008 for the U.S.-Iraq Dialogue on 
Economic Cooperation (DEC).  The DEC allowed senior officials from 
both governments to discuss the nature of the bilateral 
relationship, its future direction, and what the GOI can do to 
accelerate economic growth and improve the lives of its citizens. 
As a result of these sessions, the GOI and USG agreed to number of 
key 'next steps' for pursuing economic growth in Iraq as well as a 
follow-up mechanism to ensure actionable items are addressed 
(reported reftel C).  The High Economic Committee Secretariat within 
the Iraqi Council of Ministers (CoM) was mandated as the 
coordinating body for the GOI, and the U.S. Embassy in Baghdad is to 
be its counterpart on implementing the recommendations and decisions 
of the DEC. 
 
¶3. (SBU) EconOffs with the assistance of other CETI elements met 
several times in March with DPM Barham Salih's follow-up team to 
define the approach to take for implementation.  The DPM's team has 
put forward a proposed division of labor that breaks the 
recommendations and decisions into action items, collated into 
functional groups.  The list the DPM's team has proposed is as 
follows: 
 
Trade and Investment 
Framework Agreement (TIFA) 
--------------------------- 
 
-- U.S. to support implementation of Iraqi Investment Law by leading 
a trade mission to Iraq. 
-- GoI to seek Council of Representatives (CoR) ratification of the 
TIFA; GoI and USG each to identify representatives to the U.S.-Iraq 
Council on Trade and Investment (to be set up under the terms of the 
TIFA), a first meeting to be held upon CoR ratification. 
-- GoI seeks U.S. support to develop a legislative and regulatory 
action plan to support private sector development (including 
consumer protection and competition laws). 
-- GoI to promote public awareness of the positive role of the 
private sector in the Iraqi economy. 
-- GoI seeks U.S. support in amending legislation to promote 
development of additional free zones in Iraq including at Baghdad 
International Airport. 
-- U.S. seeks to establish a dialogue on intellectual property 
rights. 
-- U.S. offers to educate Iraqi businesses on the benefits of using 
the Generalized System of Preferences (GSP); Ministry of Trade along 
with Ministry of Industry and Minerals and Iraqi Chambers of 
Commerce to support. 
-- GoI to support U.S. joint ventures with Iraqi Small and 
Medium-sized Enterprises (SMEs) through development of an 
international arbitration mechanism and transparent government 
procurement procedures. 
-- U.S. Embassy will continue to facilitate visa issuance for Iraqi 
businesses. 
 
Banking and Finance 
-------------------- 
 
-- GoI to support restructuring of Rafidain and Al-Rasheed banks (by 
helping to clear foreign debt liabilities and implement 
recapitalization plan); this also includes accelerated development 
of Al-Rasheed's core banking system. 
-- GoI to develop new legislation to regulate the relationship 
between banks and the Central Bank of Iraq (replacing CPA Order 22 
of 2003). 
-- GoI to develop a plan to increase financing for the housing 
sector and SMEs and present it to the Economic Committee by March 
31, 2008. 
-- GoI to support development of private banks in Iraq, including 
expansion of correspondent relationships.  Encourage private banks 
to take advantage of Trade Bank of Iraq (TBI) training opportunities 
 
BAGHDAD 00001061  002 OF 003 
 
 
for Letters of Credit. 
-- GoI to support expansion of general lending activity in Iraqi 
banks, including restructuring of Industrial Bank and through the 
Export Support Fund and the Economic Development Fund. 
-- GoI to accelerate installation of the Financial Management 
Information System, including in the provinces. 
 
Energy 
------- 
 
-- U.S. to offer support in drafting and implementation of a 
National Energy Strategy (NES) for Iraq. 
-- GoI to increase private sector participation in the electricity 
sector. 
-- GoI to facilitate the transition from the International 
Accountability Management Board (IAMB) to the Committee of Financial 
Experts (COFE). 
-- GoI to improve the tender process - clear guidelines, 
transparency, international arbitration. 
-- GoI to work toward approval of oil and gas legislation and 
implement regulatory framework for the Investment Law. 
 
Agriculture 
------------ 
 
-- USAID will support improvement of institutional capacity in the 
Ministry of Agriculture through the Tatweer program - USDA will 
develop in-country training seminars for the IAER program. 
-- USAID will assist in the redevelopment of the Iraqi date industry 
through the Inma program. 
-- GoI seeks U.S. support for MoA reforestation programs. 
-- GoI seeks U.S. support to promote investment in the agricultural 
sector, including food processing and other agriculture-based 
industries. 
-- U.S. agrees to investigate allegations of removal of goods from 
State Company for Agricultural Supply warehouses by the U.S. 
military. 
 
Anti-Corruption Programs 
------------------------- 
 
-- U.S. offers to support Iraq's efforts to join Extractive 
Industries Transparency Initiative (EITI). 
-- U.S. offers to support training for Iraqi Inspectors General and 
to assist in the revision, as appropriate, of laws and regulations 
governing activities of IGs. 
 
Iraqi Living Conditions 
------------------------ 
 
-- Both sides agree to strengthen U.S./Iraq cooperation in 
ministerial capacity building to improve delivery of essential 
services. 
-- U.S. offers to support the Ministry of Trade's PDS reform 
initiative. 
-- U.S. offers to support development of the Social Safety Net (SSN) 
and help MoLSA to implement policies and procedures to combat 
corruption. 
-- U.S. seeks assurances that Internally Displaced Persons are able 
to receive their PDS benefits. 
 
--------------- 
ACTION UPDATES 
--------------- 
 
¶4. (SBU) Meanwhile, CETI elements and GOI counterparts have 
continued to move forward on several of the action items agreed at 
the DEC, taking advantage of the momentum developed in the Dialogue. 
 Updates follow: 
 
¶5. (SBU) Implementation of the TIFA: On the margins of Iraq's second 
WTO Accession Working Party meeting in Geneva (April 1-2), USDel 
proposed to GOI representatives to hold the first meeting of the 
bilateral trade and investment council in June. 
 
¶6. (SBU) State-owned Bank Restructuring:  TreasAtt reports that work 
is advancing with a representative of the Prime Minister's (PM) 
staff to organize and present a workshop addressing Bank 
Restructuring.  TreasAtt is in discussions with the SMART CARD 
vendor that contracted with Rafidain and Rasheed Banks to bring this 
service to market.  TreasAtt has obtained verbal commitment of 
support for the service from the Deputy Minister of Finance 
(Banking). 
 
¶7. (SBU) National Energy Strategy (NES):  EnergyAtt, USAID and 
Energy Fusion Cell met with the PM's advisor Thamir Ghadban to 
discuss establishing a working group to draft the NES.  Gadhban is 
 
BAGHDAD 00001061  003 OF 003 
 
 
to present the proposal to the GOI's Energy Committee, and report 
back on action taken on the proposal. 
 
¶8. (SBU) Ministry of Oil's (MoO) Ten Year Plan and proposals for 
capturing flared gas:  MoO's draft Ten Year Plan is vague, stating 
goals but lacking clearly defined implementation plans.  MoO has not 
yet set a date for the final report's release.  On flared gas, the 
MoO's 2006 agreement with Mitsubishi and Royal Dutch Shell to 
produce a Master Gas Plan (MGP) calls for the two firms to submit in 
April 2008 assessments of the existing gas processing facilities, 
need for future plants, as well as production, storage and usage. 
Embassy's Energy Team does not know if an agreement will be signed 
to extend this work on the MGP beyond April.  MoO is in discussion 
with General Electric for the supply of new and replacement turbines 
in southern Iraq to gather and compress field gas. 
 
¶9. (SBU) Reforming the Public Distribution System: Post reported 
reftel B on the Ministry of Trade's (MoT) plans for radical PDS 
reform.  Our next step will be discussions with MoT on how to best 
support the reforms. 
 
¶10. (SBU) Social Safety Net (SSN):  USAID met with the Chief of 
Staff of DPM Salih to stress the importance of the SSN law, identify 
the remaining steps to get the SSN draft into law, and identify key 
contacts in the parliamentary process.  USAID's project team is 
planning to convert the Microsoft Access (TM) database into the 
SQL-based system that will enable MoLSA to wean out beneficiaries 
who might be receiving benefits through fraud. After the conversion, 
beneficiaries will be required to submit missing information from 
the applications prior to receiving benefits.  The project team 
presented a new layout for the SSN ID card to MoLSA.  The World Bank 
has expressed interest in providing resources for the SSN work. 
 
¶11. (SBU) Extending the USDA's Iraq Agricultural Extension 
Revitalization (IAER) program:  USDA representatives met with the 
Senior Deputy Minister (DM) of Agriculture, who has personally taken 
control of the program from the Sadrist Director General for 
Extension.  A committee under the DMs charge will now be responsible 
for candidate selection.  We have agreed that more training is 
needed in Iraq.  FAS/Baghdad staff are traveling to Erbil the week 
of April 6 to assess potential training sites, primarily to be used 
for one-week training programs.  Use would depend upon security and, 
for some courses, the availability of hands-on agricultural 
facilities.  The DM suggested and USDA agreed that the IAER program 
manager would identify the most promising trainees to date to 
benefit from extended training, possibly in the U.S.  This cadre 
would become trainers for MoA extension personnel in selected areas. 
 (NOTE: USDA and the IAER Consortium members will meet in Washington 
to review these proposals and others for the program.  END NOTE.) 
 
¶12. (SBU) CoR ratification of four bilateral agreements from the 
July 2005 Joint Commission on Reconstruction and Economic 
Development: Three of these agreements are the purview of the CoR's 
Economic Committee; one falls under the authority of the Agriculture 
Committee.  The latter had its readings in the CoR before the 
February recess; the other three were scheduled for first readings 
before the recess, and now must be rescheduled.  Recent combat in 
several areas of Iraq have diverted attention, but as calm returns 
we continue to urge that these agreements be scheduled for CoR 
consideration and votes. 
 
-------- 
COMMENT 
-------- 
 
¶13. (SBU) The DPM's DEC follow-up team continues to be proactive in 
pursuing an implementation mechanism through the High Economic 
Committee of the CoM.  We note that the majority of the follow-up 
activities set out by functional group are tasked to the GoI -- at 
their suggestion.  We welcome Department's comments on the 
suggestions for USG action, and the division of labor proposed.  END 
COMMENT. 
 
BUTENIS