VZCZCXYZ0001
RR RUEHWEB

DE RUEHEG #1036/01 1421519
ZNR UUUUU ZZH
R 211519Z MAY 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 9304
INFO RUEHGB/AMEMBASSY BAGHDAD 0278
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS CAIRO 001036 
 
SENSITIVE 
SIPDIS 
 
TREASURY TO BAUKOL, MATHIASEN 
USAID FOR ME/MEA/MCCLOUD 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EPET PGOV EG
SUBJECT: AMBASSADOR'S MEETING WITH FINANCE MINISTER YOUSSEF 
BOUTROS GHALI 
 
SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET. 
 
¶1. (SBU) Summary: In an upbeat May 15 introductory courtesy 
call with Finance Minster Youssef Boutros Ghali (YBG), the 
Ambassador discussed local perceptions of economic reform, 
Egyptian assistance to Iraq and the Iraq Compact meeting in 
Stockholm, the Egyptian debt relief proposal, the Minister's 
candidacy for Chair of the IMF's International Monetary 
Financial Committee (IMFC), and several economic reform 
benchmarks.  End Summary. 
 
¶2. (SBU) The Ambassador began by complimenting YBG on his 
reform track record and recent accomplishments, noting his 
tremendous reputation around the globe.  He commented that he 
has always been an economic reformer, but it has only been 
since 2004 that he has had a sufficient number of cabinet 
allies to translate his vision into action.  He expressed 
appreciation for the bilateral relationship and said that too 
frequently people get mired in minor details of the 
relationship, without remembering the big picture positives. 
The Ambassador expressed hope that that one area where there 
could be some specific positive movement is in the area of 
the QIZ expansion, noting that Ambassador Schwab was expected 
to meet Minister Rachid at the World Economic Forum in Sharm 
el-Sheikh.  The Ambassador also noted that while she is 
optimistic, there is some domestic opposition to QIZ 
expansion.  The Ambassador noted her interest in stimulating 
greater public private partnerships in Egypt and the 
importance of a healthy corporate social responsibility 
culture as well.  YBG agreed with this, offering that 
Egyptians expect the government to do everything for them, so 
frequently are unwilling to take their own initiative or 
action. 
 
¶3. (SBU) In response to the Ambassador's concern that the 
poor are still not benefiting from Egypt's strong growth, YBG 
quickly responded that Egypt has enjoyed seven percent growth 
for only two years -- inadequate time for true trickle down 
to lift everyone's income.  He lamented the level of support 
he and the economic reformers have enjoyed domestically, 
despite the fact that they believe they are going all out to 
help both the business community and the poor.  He noted that 
there has been considerable negative local reaction to recent 
revenue generating measures designed to plug the deficit, but 
that the international reaction had been positive.  He also 
regretted that local business leaders, who are experiencing 
excellent growth and profits, privately heap praise on the 
economic reformers but publicly are silent or negative.  He 
further complained that the press loves the negative stories 
and no one is willing to write the good news. 
 
¶4. (SBU) The Ambassador raised the issue of Ministerial 
attendance at the Iraq Compact meeting in Stockholm on May 
29, noting that she had also raised it with Foreign Minister 
Aboul Gheit.  YBG made no commitments but said he would talk 
to Aboul Gheit to determine appropriate attendance.  The 
Ambassador also pressed YBG on debt relief for Iraq and 
inquired about the origins of the workers' remittances.  YBG 
said that he has told Iraqi Finance Minister Jabr that the 
Iraqis must provide a good faith effort to pay the workers' 
remittances and only then could the Egyptians consider relief 
on the official debt.  He noted that the issue was now a 
political one and outside his hands.  He said the workers' 
remittances predated the 1991 war, so were not covered by the 
United Nations Compensation Commission. (Note: In a letter 
exchange last spring before the Iraq Compact was signed in 
Sharm el-Sheikh, Jabr offered for Iraq to pay half of the 
$408 million in workers remittances and that Egypt, would in 
turn, forgive all official debt.  YBG's letter in response 
was dismissive and Egypt was silent on the subject at the 
Iraq Compact event.  There has been no progress on the matter 
in the intervening time. End note.) 
 
¶5. (SBU) The Ambassador provided a short summary of Minister 
for International Cooperation Aboulnaga's visit to the US and 
her debt relief proposal, noting that the proposal was not 
particularly well received and is unlikely to go anywhere. 
YBG showed little reaction. 
 
¶6. (SBU) YBG alerted the Ambassador of his candidacy for the 
Chair of the IMF's IMFC.  Other candidates are Indian Finance 
Minister Chidambaram and Canadian Finance Minister Flaherty. 
The Ambassador noted his candidacy and said we would relay 
the message to Washington. 
 
¶7. (SBU) The Ambassador inquired about one of the more 
difficult revenue measures that the Minister is currently 
 
engaged in: real estate tax reform, which is also a benchmark 
in the Human Development and Private Sector Development MOU. 
YBG noted that it was very difficult and that the Parliament 
was not as supportive as he would like.  He wants to slash 
the rates from 40 to 10 percent, while also eliminating all 
exemptions.  Eliminating the exemptions will vastly increase 
the numbers who owe taxes.  He conceded that he does not 
really need the new law, as he could eliminate the exemptions 
with a ministerial decree, but that would leave the high rate 
unchanged.  Regarding other benchmarks, he said the Ministry 
will need to submit the comprehensive budget law next 
Parliamentary session, rather than the current one, as he has 
not had time to read the draft law that USAID had helped 
with.  The MOU had envisioned accomplishment of this 
benchmark in 2008 -- USAID has already been informed of this 
delay. 
 
¶8. (SBU) The Ambassador concluded by thanking YBG for his 
role as board member on the Cairo American College, and noted 
that the status of the school needs to be determined, to 
ensure that the school remains tax exempt. 
 
 
 
 
SCOBEY