VZCZCXRO8604
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #3949 3521522
ZNR UUUUU ZZH
P 171522Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 0906
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHAAA/WHITE HOUSE WASHINGTON DC PRIORITY

UNCLAS BAGHDAD 003949 
 
SIPDIS 
 
NEA-I ECON PLEASE PASS TO OPIC 
 
E.O. 12958: N/A 
TAGS: EINV ECON IZ
SUBJECT: THE NEED FOR OPIC FINANCING OF PROJECTS IN IRAQ 
 
¶1. (U) SUMMARY AND ACTION REQUEST: Embassy Baghdad strongly 
urges the Board of Directors of the Overseas Private 
Investment Corporation (OPIC) to increase its participation 
in projects in Iraq.  Specifically, the Board should consider 
on an urgent basis debt financing for the Summit Group's 
hotel development project in Baghdad's International Zone.  A 
five-star, business-friendly hotel is crucial to private 
sector development in Iraq.  We make this strategic 
recommendation regarding OPIC's involvement based on the 
factors detailed below.  END SUMMARY. 
 
THE SUMMIT GROUP'S PROPOSAL 
--------------------------- 
 
¶2. (SBU) In March 2008, the Goverment of Iraq's (GOI) 
National Investment Commission (NIC) announced that it had 
issued a license to Summit Group for the construction of an 
international standard, five-star hotel with 300 rooms in 
Baghdad's International Zone (IZ).  This project was the 
first major investment license to be signed by the NIC, 
following an arduous inaugural licensing process involving 
several different GOI ministries.  The Defense Department's 
Task Force for Business and Stability Operations (TF BSO) 
provided extensive logistical and procedural support to 
Summit Group representatives.  In addition, both the former 
and current commanding generals of Multinational Forces - 
Iraq lauded the project for its strategic and intrinsic value 
to the Iraqi economy.  Marriott was initially to manage the 
hotel upon completion, but declined further involvement 
following the bombing of its hotel in Islamabad in September. 
 The Emirati hotel chain Rotana, however, quickly stepped in 
and now plans to  manage the hotel. 
 
¶3. (SBU) Hotel options for business executives, foreign 
government officials, and others that visit Iraq are 
extremely limited and require improved security and 
infrastructure.  There is currently only one hotel in the 
International Zone (Al Rasheed), and its physical condition 
is deteriorating.  The chairman of a five-star US hotel chain 
recently told the Ambassador that even though his firm is not 
involved in the Summit Group's deal, he fully supports the 
endeavor because many foreign investors will not even 
consider entering Iraq's market until they have a business 
class hotel to serve as a base of operations. 
 
THE TIME IS NOW 
--------------- 
 
¶4. (SBU) More generally, the Iraqi economy is at critical 
juncture.  Hard-earned security gains have created 
unprecedented opportunities for investment and for the Iraqi 
private sector to take its first meaningful steps toward 
development.  These gains are fragile, however, and private 
investment is needed  in order to solidify the improved 
security climate and diversify the economy.  The importance 
of private investment is even greater today with the fall in 
oil prices, which has reduced GOI budget resources and 
underscores the need for investment-led growth in non-oil 
sectors.  In addition, last month's signing of the U.S.-Iraq 
Strategic Framework Agreement and an impending multi-billion 
dollar sale by GE to the GOI for 56 generators and turbines 
that could double Iraq's energy capacity both offer an 
excellent opportunity for OPIC to further strenghten our 
bilateral commercial relationship. 
 
A STRONG SIGNAL 
--------------- 
 
¶5. (SBU) The long-term success of our efforts in Iraq depends 
on economic revitalization, which, in turn, relies on private 
investment.  By acting now on the Summit Hotel deal, OPIC 
will send a fundamental signal that investors and companies 
Qwill send a fundamental signal that investors and companies 
can do business in Iraq.  At the same time, OPIC financing 
can directly contribute to a project that will pay dividends 
by opening doors to other foreign direct investment.  We 
strongly urge the OPIC Board to act now on its decision to 
finance the IZ hotel project and consider increasing its 
level of participation in other projects in Iraq. 
CROCKER