SADDAM,S DEFEAT COULD BE A GOLDEN OPPORTUNITY FOR

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001056

SIPDIS

STATE FOR NEA/ARP
USDOC FOR 3131/USFCS/OIO/ANESA
USDOC FOR 4520/MAC/AME

E.O. 12958: DECL: 03/22/2013
TAGS: ETRD EINV IZ KU
SUBJECT: SADDAM,S DEFEAT COULD BE A GOLDEN OPPORTUNITY FOR
KUWAIT,S BUSINESSMEN--IF THEY SEIZE THE MOMENT


Classified By: Ambassador Richard H. Jones for reasons 1.5 (d)


1. (C) Summary: Long before the fighting began on Kuwait's
northern border, Kuwaiti firms were bombarding the Embassy
with requests to do business with U.S. and coalition forces
here, and expressing commercial interests in a post-Saddam
Iraq. Kuwaiti businessmen see Kuwait as the logical
jumping-off point for any firm wishing to profit from the
reconstruction of Iraq, but as yet seem to have few solid
plans to enter the Iraqi market themselves, or attract
foreign partners to do so. What's more, few Kuwaiti
businessmen or officials see the need for reform in Kuwait,
either of the country's decidedly xenophobic investment laws,
or of a business culture that rewards commercial families
with connections, rather than entrepreneurs with novel ideas.
As shown by the pre-war success of smaller companies
vis--vis traditional Kuwaiti business families, Kuwaitis
will likely have to reinvent their approach to business, or
at least start planning, if they hope to have a piece of the
Iraq reconstruction pie. End Summary.

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The Early Bird Needs No Wasta
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2. (U) In the last few weeks building up to the war now being
fought in Iraq, post's Commercial and Economic sections
received hundreds of requests from Kuwaiti companies hoping
to do business with the U.S. and Allied forces being
pre-positioned in Kuwait. Spurred by the news that some
among them were making fortunes supplying a rapidly expanding
number of U.S. forces, Kuwaiti companies began a barrage of
faxes and phone calls to the Embassy (Post's FCS office
received 40-50 requests per day, which were passed to the
Army's Directorate of Contracting, KU, at Camp Doha). In
addition, the Acting Commercial Officer (A/CO) received
requests through colleagues in almost every section of the
embassy, who had been contacted by their Kuwaiti friends and
neighbors seeking an entree into the military market.


3. (C) Alongside these requests came complaints. Large
commercial families with wide-ranging interests in Kuwait
said they were being prevented from from dealing directly
with the U.S. military, and protested that 'commercial
agents,' many of them third-country nationals, were profiting
greatly from their roles as middlemen to the U.S. military.
(Comment: Although not specifically stated, it was clear that
the largest of these commercial families were angry they
apppeared to be missing an opportunity to sell to the U.S.
military. Worse, the fact that third-country nationals were
profiting from quick action and adaptability was an obvious
irritant to Kuwaitis used to getting their way in domestic
business dealings. End Comment.)

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Where's the Plan?
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4. (C) During the pre-war period, A/CO also visited Kuwaiti
businesses and commercial organizations to hear their plans
for post-war involvement in Iraq. Some businessmen were
clear about their intentions. Well-known businessman Saud
al-Arfaj, for example, said he was interested in partnering
with U.S. companies here in Kuwait to do business in Iraq.
Others, such as the al-Ghanim family, are known to be
stockpiling goods in Kuwait's Free Trade Zone for eventual
sale to Iraq. But even while expressing their belief that
Kuwait would undoubtably play a vital role in Iraq's
reconstruction, few could explain with any coherence what
their specific plan was for entry into the Iraqi market.


5. (C) Most telling of all was a visit to the Director
General of Kuwait's Chamber of Commerce and Industry (KCCI),
Mr. Ahmed al-Haroun. Mr. al-Haroun said KCCI did not have
any specific plans for involvement in Iraq, although it
expected to be involved there commercially. Further, he
said, Kuwaiti companies wishing to partner with
multinationals to do business in Iraq (as in the case of Mr.
al-Arfaj) would find plenty already in the domestic market;
after all, Mr. al-Haroun said, Kuwait's foreign investment
laws are "perfect."


6. (C) Comment: When combined, al-Haroun's statements, a
lack of planning by individual businessmen and Kuwaiti
complaints during the pre-war period seem to paint a picture
of a business sector ill-prepared to operate outside the
protective cocoon of a Kuwaiti business environment, where
personal influence, or wasta, is the modus operandi. Even if
Kuwaiti businesses hoped to partner with U.S. companies,
Kuwait's antiquated business laws are a direct and often
insurmountable obstacle to companies looking to enter the
Kuwaiti market, or simply make the country their regional
base. (Foreign companies are required to have a Kuwaiti
majority stakeholder, on top of being taxed at 55%). If
Kuwaitis are serious about entering a liberated Iraqi market,
they will need to develop a serious plan to do so. End
Comment.
JONES