UAE: A MODEL FOR IRAQ?

1. (U) Classified by Charge d'Affaires Richard A.
Albright, for reasons 1.5 (B) and (D).



2. (C) Summary and comment: The UAE is eager to see
the swift reintegration of Iraq into the international
trade and investment system, and the emergence of
Baghdad as an economic counterweight to Riyadh in the
region. Given the cumbersome nature of GCC
deliberations, and the sense here that the UAE already
is well ahead of its fellow member states when it
comes to economic liberalization, the UAE is likely to
prefer to engage Iraq bilaterally on trade and
investment issues rather than wait for a regional GCC
approach to be developed. The UAE will seek to
further Iraq's economic recovery by offering its
expertise in the areas of banking and finance and oil,
and could also serve as a useful model in digital
readiness and the protection of intellectual property
rights (IPR). Iraq probably will receive significant
UAE private (and perhaps official) investment --
especially when a liberalized trading regime and legal
framework to protect foreign investors in Iraq are in
place. End summary and comment.



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The UAE Offers Its Experts For Iraq's Recovery


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3. (C) The UAEG already has provided specific
proposals for participation in Iraq's economic
recovery (ref B). UAE officials committed to provide
training to Iraqi Central Bank officials in banking
operations, banking supervision and examination, and
anti-money laundering detection and investigation.
Combating terrorist financing through its formal and
informal financial networks has been a major goal of
the UAEG since 2000, and an area in which the UAEG has
made tremendous strides. The UAE was the first Arab
country to become a member of the elite Egmont Group
of Financial Intelligence Units, and could well serve
as a model for Iraq's own financial system.



4. (C) The Abu Dhabi-based Arab Monetary Fund (AMF)
also has offered to help develop responsible fiscal
and monetary policy in Iraq, carve out a supervisory
role for the Iraq Central Bank, and help establish a
liberalized trade regime that would lead to Iraq's
eventual accession to the WTO. The AMF has expertise
in a broad range of economic topics, as well as a
formal agreement with the WTO to provide training on
trade-related issues to its Arab membership -- which
includes Iraq.



5. (C) UAE officials have indicated that they could
dispatch experts from the Abu Dhabi National Oil
Company (ADNOC) to assist in the near term
reconstruction of the Iraqi oil sector. Although the
UAE could assist the Iraqi Oil Ministry in oil
exploration, refining, processing, distribution and
management, Abu Dhabi realistically will be Baghdad's
competitor in this sector over the long-term.



6. (C) Senior UAE officials have been actively
engaged with the USG regarding Iraq's reconstruction
even before the war, including high level visits to
Washington to promote potential participation in terms
of assistance, investment and trade. Recently, 100
Iraqi businessmen formed an off-shore corporation in
the Jebel Ali Free Zone (ref C), with the strong
support of the Government of Dubai, to compete for
Iraqi reconstruction contracts (Comment: Dubai is
perturbed by the fact that while the Jordanian/Iraq
border appears wide open for commerce, the port of Umm
Qasr, Dubai's lifeline to the Iraqi marketplace,
remains closed.)



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The UAE: A Model Of Success


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7. (C) The UAE, and Dubai in particular, is well
ahead of the rest of the region in terms of telecom
interconnectivity and digital readiness, and could
serve as a model for communications systems in Iraq.
Telecom networks in the UAE are based on cutting-edge
technology, and local governments and businesses are
regional pioneers in e-government and e-commerce
initiatives. We note that Thuraya -- which, to our
knowledge, is one of only two mobile phone service
providers currently operating in Iraq -- is based in
Abu Dhabi, with the UAEG as a major shareholder.


8. (C) The UAE is at the forefront of protecting
intellectual property rights (IPR) in the region.
Although there is room for improvement in consistent
implementation, the UAE represents a useful example of
the strides that can be made working hand-in-hand with
U.S. Government and businesses to protect property
rights. As part and parcel of its development into a
regional trading center, the UAE Government has made
the protection of intellectual property a priority in
recent years. New copyright, trademark and patent
laws, passed in 2002, provide high levels of
protection for U.S. intellectual property, while an
agreement -- brokered by the Embassy in 2002 --
continues to provide TRIPs-plus levels of protection
for U.S. pharmaceuticals.



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Tapping UAE Capital


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9. (C) The UAE's two stock exchanges in Abu Dhabi or
Dubai offer a pool of investment capital for Iraqi
companies. The Abu Dhabi Securities Market (ADSM),
for example, currently lists 21 local and foreign
companies on its trading board from several different
sectors, including banking, insurance, services
(telecom and IT-related companies), hotels, and is
actively courting more foreign businesses. Oatar's
telecom monopoly, Q-Tel, already is listed and ADSM is
negotiating with the National Bank of Kuwait to list
later this year.



10. (C) The UAEG itself is unlikely to invest
significantly in Iraq; the Abu Dhabi Investment
Authority has told us that very little of its
estimated $200 billion in assets is invested in the
Middle East -- mostly to American, European, and
Asian markets. The UAE Offsets Group and the
International Petroleum Investment Company, however,
are just two of several quasi-governmental
organizations that may seek both portfolio and
greenfield investments in Iraq.



11. (C) UAE construction, transportation, and
logistics companies are likely to invest significant
equities in starting businesses in Iraq, upgrading
Iraq's infrastructure, and directly contributing to
Iraq's economic recovery. Prominent UAE companies
with state-of-the-art technology, electronic mapping,
and positioning equipment are vying to upgrade and
manage the major Iraqi airports and seaports. Dubai's
successful creation and management of numerous free
zones may serve as a model for Iraq. Indeed, UAE
officials already have proposed the construction of
three free zones in southern, central, and northern
Iraq.



12. (U) This cable was coordinated with Amconsul
Dubai.

Albright