VZCZCXRO7272
PP RUEHROV
DE RUEHJM #1282/01 2081418
ZNR UUUUU ZZH
P 271418Z JUL 09
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 5557
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 JERUSALEM 001282 
 
SIPDIS 
SENSITIVE 
 
NEA FOR FRONT OFFICE AND IPA; EEB FOR IFD/OIA/MCULLINANE; 
NSC FOR KUMAR 
DEPT PASS OPIC FOR DRUMHELLER/SASSER 
 
E.O. 12958: N/A 
TAGS: ECON EAID KWBG PGOV IS EFIN
SUBJECT: WEST BANK HOUSING PROJECTS: FINANCING ON TRACK, 
BUT HURDLES REMAIN 
 
REF: 08 JERUSALEM 1943 
 
¶1. (SBU) Summary.  Palestinian Authority (PA) officials and 
private sector representatives told Overseas Private 
Investment Corporation (OPIC) representatives that obstacles 
largely related to infrastructure needs still face a number 
of West Bank housing developments.  OPIC updated contacts on 
the status of an affordable mortgage facility, now expected 
to be providing loans by the end of 2010.  PA officials 
support a donor "roadshow" to seek contributions for basic 
public infrastructure.   End Summary. 
 
¶2. (U) OPIC VP for Structured Finance Robert Drumheller and 
Deputy Chief of Staff Jackie Strasser visited Jerusalem and 
Ramallah July 18-22 to promote a joint USG-PA approach to 
donors in support of a number of proposed West Bank housing 
projects, and to update PA contacts on developments with 
OPIC's Affordable Mortgage and Loan Corporation (AMAL).  OPIC 
expects AMAL to be formed by the end of 2009, staffed up in 
2010, and ready to begin providing mortgages by end of 2010, 
which is when the first affordable housing units at Rawabi 
(reftel), Al Reehan, and other projects are expected to come 
online. 
 
Problems with Area C Issues and Infrastructure 
--------------------------------------------- - 
 
¶3. (SBU) Bashar Masri, developer of the Rawabi housing 
project, said that he would not break ground on his project 
until the access road is under construction.  Masri noted 
that the road's planned route runs through Area C.  While the 
GOI has informally given him approval, he said, a formal 
decision must be taken by the Israeli Cabinet.  According to 
Masri, the GOI needs a formal request from the PA.  Masri 
said that PM Fayyad will send a letter "within a week." 
Masri said that while he would rather have a commitment from 
donors or the PA to fund some of the infrastructure before 
breaking ground, he would not hold up the project. 
 
¶4. (SBU) Masri noted, though, that some form of donor support 
for infrastructure is essential to ensure that the cost of 
the housing remains affordable (OPIC estimates that the 
average unit cost will increase by $16,000 without donor 
assistance).  The Palestinian Investment Fund (PIF) held a 
formal groundbreaking ceremony for its 2,000-unit project, Al 
Reehan, in July, but has yet to start serious construction, 
according to Masri.  PIF CEO Mohammad Mustafa told OPIC that 
the PA had signed two memoranda of understanding with PIF to 
fund part of the infrastructure, but that no funding had 
materialized.  PIF was now prepared to build the 
infrastructure without assistance, he said. 
 
¶5. (SBU) Representatives from the developer "Baydar" told 
OPIC of their plans for 1,000 units outside Nablus and 60 
units in Ramallah.  They noted that work on their Nablus 
project stalled five years ago after construction of some 
roads and infrastructure, because access was blocked by a 
military road in Area C.  They requested USG assistance in 
pressing the GOI for a response to their access proposals. 
 
Ministers Supportive, but Want PA Ownership 
------------------------------------------- 
 
¶6. (SBU) Minister of Housing and Public Works Mohammad 
Shtayyeh, Minister of National Economy Bassim Khoury, and 
Minister of Planning Ali Jirbawi met jointly with OPIC 
representatives.  The ministers raised concerns that the 
anticipated cost of the proposed housing units 
($40,000-120,000/each) priced them out of the reach of 
average Palestinians.  They expressed unease about the terms 
of the proposed mortgages, and noted the importance of 
ensuring that the value of any donor investment in 
infrastructure is passed on to the homeowners, not to the 
developers.  Shtayyeh underscored that the PA wanted to avoid 
a repetition of previous Palestinian efforts in creating a 
mortgage market, which he characterized as a "total failure". 
 
 
¶7. (SBU) Shtayyeh said it would be important for the PA to 
remain in the lead on affordable housing and infrastructure. 
He described plans to form a ministerial-level Infrastructure 
Committee to consider each project's infrastructure needs in 
an organized fashion.  Jirbawi was concerned that none of the 
affordable housing projects had started work in earnest on 
the ground.  All three ministers stressed the importance of 
 
JERUSALEM 00001282  002 OF 002 
 
 
affordable housing and agreed that a PA representative would 
join OPIC in any donor "roadshow" to raise money for 
infrastructure. 
 
Next Steps 
---------- 
 
¶8. (SBU) OPIC representatives agreed to forward additional 
information to technical experts from the three ministries 
regarding AMAL, propose possible donor funding mechanisms, 
and solicit input from the PA in preparation for outreach to 
donors.  Additionally, Rawabi's Masri told OPIC that he would 
provide briefings for the ministers to address their concerns 
about the project's affordability. 
 
¶9.  (U)  OPIC VP Robert Drumheller has cleared this cable. 
WALLES