VZCZCXRO0431
PP RUEHBC RUEHDE RUEHDH RUEHIHL RUEHKUK
DE RUEHGB #2776/01 2880816
ZNY CCCCC ZZH
P 150816Z OCT 09 ZDK
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 5093
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 002776 
 
SIPDIS 
 
E.O. 12958: DECL: 10/14/2018 
TAGS: ECON POL PGOV PREL EINV ETRD EINT IZ
SUBJECT: IRAQ INVESTMENT CONFERENCE: DELIVERING A CLEAR 
MESSAGE 
 
REF: BAGHDAD 2744 
 
Classified By: A/DCM Gary Grappo for reasons 1.4 b and d 
 
¶1. (C) Summary:  The October 19 U.S.-Iraq Dialogue on 
Economic Cooperation (DEC) and the October 20-21 Business and 
Investment Conference (BIC) will put the spotlight on Iraq's 
aspirations to participate more fully in the global economy. 
U.S. and Iraqi government officials can expect questions from 
the press, public, and our own USG colleagues about our 
expectations for these events and our thoughts about Iraq's 
economic future.  Welcoming foreign participation in Iraq's 
domestic economy is not an attitude that comes easily to many 
Iraqis, despite a widespread desire to accelerate economic 
growth and job creation.  We offer herein some thoughts on 
the messages and context shaping our DEC and BIC. END 
SUMMARY. 
 
 
USG Motivations for Hosting the Investment Conference 
--------------------------------------------- -------- 
¶2. (C) The Business and Investment Conference was born not of 
purely commercial interests, but rather from the USG,s 
commitments in the Strategic Framework Agreement (SFA) to 
support Iraq's economic development and to encourage foreign 
investment here.  Post recognizes the many challenges facing 
anyone attempting to do business in and with Iraq; that said, 
Iraq still offers unique opportunities and substantial future 
potential.  It is in the United States, strategic interest 
to foster diversified economic growth here and also to ensure 
that U.S. companies get their feet in the door early in this 
process. 
 
¶3. (C) While the government of Iraq (GOI) has begun telling 
the world that it is now "open for business," it is not clear 
that the government fully understands the need to create an 
investment climate that will attract cautious, profit-driven 
investors.  Nor is it clear that Iraqis fully understand the 
profit motives of private sector companies from the 
international community.  Consistent with decades of state 
control over nearly every aspect of the economy, some GOI 
officials believe that the USG can command private companies 
to make an investment or engage in a contract.  Further, some 
GOI officials have unrealistic expectations about Iraq's 
intrinsic appeal to investors, or the valuation of its assets 
and services. (Reftel describes the GOI's continued statist 
approach to economic management.) 
 
¶4. (C) The bilateral DEC provides a venue for quiet, firm 
government-to-government discussions.  The investment 
conference, however, will be an opportunity for GOI officials 
to hear concerns and expectations directly from private 
companies with money to invest, rather than USG officials. 
This may well be the most important outcome of the 
conference.  The GOI also will get a sense of how Iraq 
compares with other countries competing for foreign direct 
investment.  Iraq would do well to set its sights on creating 
a globally competitive economy, rather than settling on the 
oil-dependent models of its neighbors. 
 
¶5. (C) Helping Iraq's economy stabilize, grow, and diversify 
through U.S. and other foreign investment supports our 
strategic goals.  For example, a strong, open economy that 
produces sufficient jobs for Iraq's growing population would 
bolster Iraq's still-inexperienced government and help 
provide political stability.  Ensuring U.S. companies' entry 
to Iraq, however, is good not just for Iraq itself, but for 
the U.S. economy in a narrower commercial sense.  In many 
ways, Iraq's economy is a blank slate.  If U.S. firms gain an 
early foothold here, they will influence the adoption of U.S. 
Qearly foothold here, they will influence the adoption of U.S. 
business models, procedures, standards, and products. (As was 
the case in the 1960's and 1970's in Saudi Arabia where a 
robust U.S. training and advisory mission, coupled with an 
equally ambitious business presence helped set the stage for 
that country's economic development and current long term 
ties to U.S. business.)  This could give U.S. companies 
advantages in follow-on business development.  Our firms 
would also get an early start in developing relationships 
critical for productive business ventures in Iraq. 
 
Some Talking Points... 
---------------------- 
¶6. (SBU) The Washington interagency and Embassy Baghdad is 
preparing issues papers for the DEC. During the DEC and the 
conference, it will be useful if USG officials also keep a 
few broader themes and messages in the fore, for use with GOI 
as well as the press.  We suggest drawing from the following 
points. 
 
USG Messaging to the GOI 
------------------------ 
 
BAGHDAD 00002776  002 OF 002 
 
 
--It is important that the senior GOI decision makers and 
leaders at the BIC listen and respond thoughtfully to the 
concerns and questions of U.S. and other investors regarding 
foreign investment. 
--The burden of proof is on Iraq to show that it is serious 
about wanting to attract foreign investment.  Despite very 
promising steps (such as the passage by the Consul of 
Representatives on October 13 of important amendments to the 
National Investment Law) the Iraq government's record on 
encouraging foreign participation in the economy is mixed. 
--GOI representatives should be prepared for tough questions 
from a skeptical audience.  Potential investors will likely 
ask about regulatory reform, investment laws, contract 
performance, a weak banking system, land use issues, and 
regulations and laws that appear to support the Arab League 
Boycott. 
--Non-payment issues for contracts with the GOI and support 
of Iraqi state-owned companies over private companies damage 
the investment climate and create negative press stories. 
--An independent and empowered judiciary with a specific 
focus on contracts and arbitration is an important concern 
for serious international investors.  Iraq's signing 
agreements to honor international arbitral awards, such as 
the New York Convention, also would be an important signal to 
foreign business people. 
 
Universal Message for Press, Private Sector, etc. 
--------------------------------------------- ---- 
--The Iraq National Investment Commission has worked with the 
U.S. Chamber of Commerce, the Department of State and the 
Department of Commerce in planning for the BIC. 
--The Iraqi delegation will include not only senior Iraqi 
ministers and officials from the national government, but 
provincial and Kurdish Regional Government (KRG) governors 
and officials as well.  Additionally, Iraq's private sector 
will be strongly represented with participants from nearly 
every province. 
--Among the market sectors that will be highlighted at the 
BIC are oil and gas, power generation, agriculture, housing 
and construction, transportation, banking/finance, industry, 
and telecommunications. 
--We're hoping that the new relationships formed at the 
conference between American and Iraqi businesspeople and 
officials will lead to substantial increases in investment 
and trade between our two nations. 
--We are confident that American companies will play an 
important role in helping Iraq's economy to grow and 
diversify. 
HILL