VZCZCXRO7228
PP RUEHROV
DE RUEHTV #2499 3100942
ZNR UUUUU ZZH
P 050942Z NOV 08
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 9081
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEAEPA/HQ EPA WASHDC

UNCLAS TEL AVIV 002499 
 
SIPDIS 
SENSITIVE BUT UNCLASSIFIED 
 
DEPT FOR NEA/RA, NEA/IPA, OES/SENV 
EPA FOR INTERNATIONAL 
AMMAN for ESTH - Bhalla 
 
E.O. 12958: N/A 
TAGS: SENV EAID PREL KPAL KWBG JO IS
SUBJECT:  WATER PROJECT FINANCING WORKSHOP PRESSES FOR ALTERNATIVES 
 
¶1. (SBU) On November 5-6, the Milken Institute hosted a Financial 
Innovation Lab in Jerusalem to promote the idea of using public 
sector bond-issuing mechanisms for financing water, wastewater, and 
environmental remediation projects in the region.  60 Israeli, 
Palestinian and Jordanian officials, academics and businesspersons 
joined with US municipal bond finance experts to explore the water 
infrastructure situation in Israel, the Palestinian Territories and 
Jordan, and to evaluate the possibility of using this avenue to fund 
greatly needed facilities.  The Milken Institute is based in Santa 
Monica, California, and promotes market-based solutions to public 
policy and economic development problems.  Embassy ESTHOff attended 
the two-day, off-the-record workshop. 
 
¶2. (U) The program had four phases: first, defining the problem; 
second, reviewing case studies; third, describing of the bond 
funding mechanism used by public utilities and authorities in the 
United States; and fourth, considering the use of bond financing 
tools in the Israel/Palestinian context.  On consecutive days, the 
dismal state of Israel's polluted rivers and the region's dire water 
and wastewater situation were outlined by academics, civic 
authorities, and NGOs such as Friends of the Earth Middle East. 
Case studies of the Kidron, the Yarkon, the Jordan, and the 
Alexander Rivers were offered, and the conditions of Lake Tiberias 
(the Sea of Galilee), the aquifers, and the watershed of the 
Israel/Palestine/Jordan geographical region were described. 
 
¶3. (SBU) Barclays Capital (formerly Lehman Brothers) Managing 
Director Peter Taylor and Susan Weil of Lamont Financial Services 
explained the municipal bond financing mechanisms used in the US. 
Participants expressed interest in the idea, but questioned its 
application in the region.  Is the legal framework for such 
bond-issuing municipal authorities sufficiently established in the 
region?  Creation of a transnational issuing authority (to address 
the border-transcending nature of water and waste treatment 
problems) also raised questions of legal jurisdiction.  Given the 
estimated 40% loss of distributed West Bank water due to theft and 
seepage, is it even possible to assure the reliable revenue stream 
needed as proof of repayment potential?  Can wastewater service be 
billed for (and viably denied to non-payers) like freshwater 
delivery?  When addressing a public good such as cleaner rivers or 
public parks, which generate negligible user fees at best,  where 
will the revenue stream come from?  Would the World Bank or other 
donors agree to placing their aid funds in an escrow account as 
security for bond issuers, as some financing structures call for? 
While all of these questions may find answers, they point to the 
need to adapt the financing model to the regional realities.  One 
participant sagely observed that the problem was really not one of 
money or water, but rather of relationships: the need to improve the 
cooperation and interactions among the responsible authorities of 
the three governments involved. 
 
Cunningham