Identifier
Created
Classification
Origin
05KUWAIT3831
2005-08-27 15:24:00
CONFIDENTIAL
Embassy Kuwait
Cable title:  

KUWAIT CENTRAL BANK GOVERNOR OPTIMISTIC ABOUT NEW

Tags:  EFIN ETTC KTFN KVPR PTER PINR CVIS KU TERRORISM 
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C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 003831 

SIPDIS

STATE FOR EB/ESC/TFS IKRUM, S/CT TKUSHNER, NEA/ARPI
SWALKER, NEA/ELA SSONTY, NEA/IPA GLOGERFO, EB/JBLOOM, NSC
FOR JZARATE, TREASURY FOR DGLASER, OFAC DIRECTOR RWERNER,
JUSTICE FOR JSILVERWOOD,

E.O. 12958: DECL: 08/27/2015
TAGS: EFIN ETTC KTFN KVPR PTER PINR CVIS KU TERRORISM
SUBJECT: KUWAIT CENTRAL BANK GOVERNOR OPTIMISTIC ABOUT NEW
TERROR FINANCE LAW, KUWAIT'S ECONOMY AND PROSPECTS FOR A
REGIONAL FINANCIAL CENTER

REF: STATE 3774

Classified By: Ambassador Richard LeBaron: Reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 003831

SIPDIS

STATE FOR EB/ESC/TFS IKRUM, S/CT TKUSHNER, NEA/ARPI
SWALKER, NEA/ELA SSONTY, NEA/IPA GLOGERFO, EB/JBLOOM, NSC
FOR JZARATE, TREASURY FOR DGLASER, OFAC DIRECTOR RWERNER,
JUSTICE FOR JSILVERWOOD,

E.O. 12958: DECL: 08/27/2015
TAGS: EFIN ETTC KTFN KVPR PTER PINR CVIS KU TERRORISM
SUBJECT: KUWAIT CENTRAL BANK GOVERNOR OPTIMISTIC ABOUT NEW
TERROR FINANCE LAW, KUWAIT'S ECONOMY AND PROSPECTS FOR A
REGIONAL FINANCIAL CENTER

REF: STATE 3774

Classified By: Ambassador Richard LeBaron: Reasons 1.4 (b) and (d)


1. (C) Summary. In an August 24 meeting with the Ambassador,
Sheikh Salem Abdulaziz Al-Sabah, Governor of the Central Bank
of Kuwait made the following key points: (1) GOK remains
committed to enacting comprehensive legal reform on terror
finance and money laundering; (2) an independent auditing
firm should assess Kuwaiti charities; (3) economic reform is
on hold as a result of the booming economy; (4) powerful
politicians and poor management can derail prospects for a
Kuwaiti Securities and Exchange Commission; (5) Kuwait has
the makings of a regional financial center; and (6) Kuwait's
expatriate laborers need better laws to protect their rights.
End Summary


Comprehensive Terror Finance Law
--------------


2. (C) On August 24, Ambassador met with Sheikh Salem
Abdulaziz Al-Sabah, Governor of the Central Bank of Kuwait.
The Ambassador stressed the importance of maintaining
dialogue on terrorist financing (TF) and anti-money
laundering (AML) initiatives to ensure continued success in
these two increasingly important arenas of cooperation. The
Ambassador called for sustained and urgent action to ensure
timely implementation of TF/AML measures. The Ambassador
also mentioned the upcoming visit by Treasury's OFAC Director
Robert Werner to Kuwait as an important opportunity to
discuss TF/AML issues (Note: Al-Sabah will be in Bahrain for
the GCC Central Bank Governors meeting in mid-September and
recommended Mr. Werner meet Deputy Governor Nabeel Al-Mannae
in his absence.)


3. (SBU) Al-Sabah reaffirmed the Government of Kuwait's
(GOK) continued commitment to combating TF/AML as part of its

ongoing efforts to enact legal reform and strengthen its
relevant institutions. Al-Sabah pointed out that the
National Committee to Combat Terror Finance and Money
Laundering has as its main objective the amendment of the
current AML law. Al-Sabah said the draft law will be ready
in December and will be submitted to the Council of Ministers
(cabinet) for approval and subsequently to the National
Assembly for adoption. Al-Sabah agreed with the Ambassador
to "exchange notes" on the draft before it is submitted for
approval and adoption.


4. (SBU) Al-Sabah explained that the National Assembly was
aware of the pending law and its comprehensive nature
intended to address shortfalls in the country's TF/AML
regime. He admitted that the country's TF/AML efforts should
be centralized under one authority to ensure a streamlined
process. He commented that the struggle against TF and ML
would be a long-term endeavor for Kuwait and the region.


Independent Audit Firm for Charity Oversight
-------------- --------------


5. (C) With regard to charity oversight, Al-Sabah offered an
alternative solution to the current Cabinet decree requiring
the Ministry of Social and Labor Affairs' (MSLA) approval of
all charity fund transfers abroad. In an effort to further
strengthen the current system, Al-Sabah proposed that an
independent non-governmental auditing firm, hired by the
MSLA, provide quarterly reports on charities to the ministry
for review and appropriate action. Al-Sabah noted that he
seemed to have convinced the Minister of Social and Labor
Affairs but needed to follow-up with him on the matter. The
Ambassador offered to follow-up with the minister as well to
advance the idea.


6. (C) The Ambassador took the opportunity to mention the
ongoing efforts of U.S. customs advisors assigned to the
Kuwaiti Customs Agency to strengthen customs enforcement and
launch new anti-money laundering initiatives. The Ambassador
called for continued GOK support for their efforts as part of
the broader TF/AML program. Al-Sabah was familiar with this
cooperation and voiced support for the effort.

Another Great Year for the Kuwaiti Economy
--------------


7. (SBU) On the Kuwait economy, Al-Sabah voiced enthusiasm
with continued record growth rates (20 percent nominal GDP;
10 percent real GDP growth) but cautioned against the excess
liquidity in the economy spurred by increased government
spending, the oil boom, and repatriated Kuwaiti capital. He
added that export of capital was lower than import capital
(for this traditionally capital exporting country) and that
the Central Bank had increased its interventions in the
market to control inflation, which is at 2.3 percent
(annualized) in comparison to its typical range of 0.7 and
1.5 percent. Al-Sabah was less optimistic about the
prospects of economic reform given GOK officials'
unwillingness to tackle the issue amidst unprecedented
economic growth.



8. (C) The Ambassador asked about the possibility of
establishing a Securities and Exchange Commission for Kuwait
to help regulate the country's stock market. Al-Sabah agreed
on its utility but cautioned that without good corporate
governance, the SEC would fall prey to mismanagement and the
whims of powerful politicians. The Ambassador emphasized the
need for electoral reform to resolve the current districting
problems. He explained that Kuwait's current districting
laws bind parliamentarians to a select constituency in small
districts rather than to broader and more diverse
constituencies and issues of national interest.


Looking Ahead: Kuwait as Regional Financial Hub
-------------- --


9. (C) Al-Sabah said he was not attending the World Bank/IMF
meetings in Washington because he was recently assigned to
head a government committee to explore the prospects of
Kuwait becoming a regional financial center. He pointed out
that Kuwait's infrastructure, communications system, and
extensive laws provided the key ingredients for a successful
outcome and that a key missing ingredient was incentives for
foreign banks. He dismissed the notion of Dubai serving as a
financial model, remarking that the lack of oversight of the
country's financial institutions made it an "imprudent
market" plagued by excessive freedom and lack of appropriate
regulations. With regard to foreign banks entry into the
Kuwait market, Al-Sabah noted that Citibank had finally
completed its application to begin operations, joining BNP
Paribas and HSBC which are already operational.


Rights of Kuwait's Expat Laborers
--------------


10. (C) The Ambassador urged the Governor to take into
account the rights of expatriate laborers within the context
of labor laws and the assessment for a Kuwaiti financial
center, stressing the importance of addressing the needs and
rights of the country's laborers. The Ambassador explained
that the problem had become a growing human rights concern
with the potential to impact the bilateral relationship.
Al-Sabah accepted the criticism and expressed dismay with the
manner in which many expatriate laborers are treated. He
said a stronger legal framework is required to regulate this
part of the economy.


Bio Note
--------------


11. (U) Sheikh Salem Abdulaziz Al-Sabah was born on November
1, 1951. He received his Bachelor of Arts in Economics at
the American University of Beirut. He has been Governor of
the Central Bank of Kuwait and Chairman of the Board of
Directors since October 1, 1986. Al-Sabah serves on the
board of a number of financial institutions including the
Institute of Banking Studies, the Kuwait Investment
Authority, the Higher Petroleum Council, the Higher Council
on Planning and Development and as Alternate Governor of the
State of Kuwait at the IMF and Arab Monetary Fund. One of
his sons is currently employed by BNP Paribas and another by
the Social Services Endowment.


LEBARON