VZCZCXRO6010
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #4057/01 3641358
ZNR UUUUU ZZH
P 291358Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 1049
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 BAGHDAD 004057 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN IZ
SUBJECT: PRT SALAD AD-DIN: MATTRESS MILLIONAIRES LOOK TO 
BOOST BALAD 
 
REF: BAGHDAD 3540 
 
 
¶1. (U) This is a PRT Salah ad-Din reporting cable. 
 
¶2. (SBU) Summary: Balad's newly rich want to get richer, but 
the opportunities they see look too risky.  At a December 16 
meeting with the PRT, a dozen wealthy sheikhs said they did 
not know where to put the millions they had amassed since 
2003 through the Sons of Iraq (SOI) and construction 
contracts funded by the Coalition.  They need a secure place 
to store their cash, but they also want to make investments 
that will build the Salah ad-Din's (SaD) economy.  With 
advice and encouragement from the PRT, the sheikhs are making 
the first steps toward forming business associations that 
will build trust and reduce risks.  Embassy Baghdad can help 
by connecting successful provincial entrepreneurs with 
banking and investment services.  End summary. 
 
Millionaire Shiekhs Leave Cash under the Mattress 
--------------------------------------------- ---- 
 
¶3. (SBU) At a December 16 meeting with PRT personnel, a dozen 
wealthy sheikhs asked for assistance with a problem common to 
several successful businessmen in Balad -- where to put the 
millions they have amassed since 2003 through the Sons of 
Iraq (SOI) and construction contracts funded by the 
Coalition.  The sheikhs who control the villages surrounding 
Balad became contractors when Coalition forces took over a 
nearby airbase in 2003. 
 
¶4. (SBU) That's the good news.  The bad news is that the 
sheikhs do not have a safe place to store their millions, and 
they are ultra-cautious when it comes to making investments. 
One sheikh commented that they had "all benefitted from the 
chaos since 2003, but we keep our money at home because we 
can't trust in the government or the banks."  The sheikhs see 
the state-owned banks as corrupt and expressed equal 
skepticism about the private banks that are establishing 
offices in SaD.  Another sheikh said he had invested a large 
amount of money in a venture to establish a car importing 
business, but his Turkish partners had "run off with my money 
and cheated me."  Instead of partnering with foreign firms, 
the sheikhs said local investment projects were the safest 
bet for their money, since they know the best local partners 
and opportunities. 
 
Local Investment Opportunities;Secure Space from U.S. Forces 
--------------------------------------------- --------------- 
 
¶5. (SBU) The sheikhs' preferred solution for the perceived 
risk posed by the banks is an arrangement where they could 
store their money at a space on or near the Balad military 
base and manage local investment projects.  The sheikhs said 
the physical security provided by the presence of Coalition 
forces was a prerequisite for establishing a secure space, 
where they could conduct business.  PRT Econ Chief offered to 
coordinate further technical assistance for investment and 
banking options. 
 
Embassy Comment 
--------------- 
 
¶6. (SBU) The sheikhs' glut of cash in an area poorly served 
by banks may be unusual in Iraq, but there is a common Iraqi 
story at the root of the mattress millionaires' problem. 
Building trust between potential depositors and the Iraqi 
banking system is a problem with regulatory, cultural, and 
security dimensions.  The privately owned banks are rapidly 
expanding their branch networks in SaD, but it remains 
difficult for entrepreneurs to borrow (reftel).  At the same 
time, the Iraqi public is wary of banks, especially private 
ones.  The banks do not trust potential borrowers, and their 
potential depositors do not trust the banks.  This mutual 
suspicion magnifies the perceived business risks that are the 
main obstacle to private-sector growth in Iraq. 
Qmain obstacle to private-sector growth in Iraq. 
 
¶7. (SBU) One remedy for risk is relationships, which is an 
area where the PRTs and the Embassy can assist by connecting 
potential clients with professional banking and investment 
services.  Iraq's prospects for economic growth will improve 
when expectations of mutual advantage overcome the habits of 
suspicion fostered by decades of dictatorship.  PRT Salah 
Ad-Din and the Civil Affairs units of the 25th Infantry 
Division are using the trust they have gained among local 
leaders to build new relationships among Iraqis who until now 
could not find a path to cooperation.  Building these new 
relationships is painstaking work, requiring hours of 
meetings and gallons of tea.  But this investment of time and 
words promises to pay even bigger dividends than millions 
spent on bricks and mortar.  The Embassy can support this PRT 
effort by persuading Baghdad's bankers to take a closer look 
 
BAGHDAD 00004057  002 OF 002 
 
 
at neglected territory like Balad.  End comment. 
CROCKER