POINTS DELIVERED ON PRESIDENT'S G-8 AFRICAN

UNCLAS SECTION 01 OF 02 KUWAIT 003977

SIPDIS

STATE PLEASE PASS TO USAID JON BRAUSE AND TOM MARCHIONE

E.O. 12958: N/A
TAGS: EFIN EAID EINV ETRD KU XA
SUBJECT: POINTS DELIVERED ON PRESIDENT'S G-8 AFRICAN
HUMANITARIAN EMERGENCIES INITIATIVE

REF: STATE 162169


1. (U) Begin Summary: On September 4, Econoff delivered
reftel points to representatives from the Kuwait Fund For
Arab Economic Development (a government entity) and the Arab
Fund for Economic and Social Development. While neither
organization deals strictly in humanitarian projects
associated with the President's G8 Africa initiative, they do
fund a broad spectrum of development projects in over a dozen
African countries through concessionary loans and grants.
Both reps were appreciative of the reftel points. The Kuwait
Fund representative noted the likelihood of discussions on
aid to Africa at the upcoming World Bank/IMF meetings in
Washington. End Summary


2. (U) Econoff delivered reftel points orally and in the form
of a "non-paper" to Mr. Emad Al-Majed, Regional Manager for
Central, East and South African Countries at the Kuwait Fund
for Arab Economic Development (KFAED) and Mr. Abdul-Hamid
Zigalaie, Economic Advisor at the Arab Fund for Economic and
Social Development (AFESD). Both Al-Majed and Zigalaie found
the statistics in the non-paper useful and underscored their
respective organization's continued commitment to providing
assistance through concessionary loans and grants to Africa.
Al-Majed explained that the Government of Kuwait (GOK) is
anticipating discussions about aid to Africa on the margins
of the upcoming World Bank/IMF meetings in Washington.


3. (U) Zigalaie clarified that AFESD was restricted to
providing assistance only to Arab countries in Africa,
therefore limiting its assistance to Djibouti, Mauritania,
Sudan, and Somalia (Note: assistance to Somalia has been
on-hold given the country's political situation. End Note).
Both KFAED and AFESD fund a wide range of development
projects including infrastructure projects, water sanitation,
agricultural development, and social services
(schools/hospitals).

Kuwait Fund Active in Forty African States
--------------


4. (U) Al-Majed explained that the KFAED, headed by the
Kuwaiti Foreign Minister, is required to allocate half its
annual development funds to Arab countries with the remainder
dispersed to Africa (18%),East Asia (21%),Central Asia and
Eastern Europe (7%),South America and the Caribbean (3%).
According to its March 2005 report, KFAED has dispersed, to
date, approximately 3.5 billion USD in concessionary loans to
40 African countries (see KFAED website www.kuwait-fund.org
for full listing). Approximately 56 percent of these loans
have been for transportation development.


5. (U) Al-Majed lamented that African counterparts were slow
to submit proposals for KFAED funding and that the biggest
challenge was determining "who to contact" in the African
governments. He pointed out that competing
intra-governmental priorities prevented many African states
from drafting viable funding proposals reflecting legitimate
national priorities vice parochial interests. Al-Majed
admitted that despite such procedural challenges, KFAED was
committed to pursuing new development opportunities in Africa
by working closely with African government interlocutors, at
times informally, to improve their respective proposals to
help ensure funding. He cautioned that KFAED regulations
prohibited funding new projects in countries with outstanding
arrears with KFAED, but noted that the organization remained
flexible in resolving arrears in the interest of ensuring
development progress.


Arab Fund Limited to "Arab-African" Countries
--------------


6. (U) Zigalaie reaffirmed AFESD's continued support to
development in Sudan, Djibouti, and Mauritania. He said that
assistance to those and other countries is determined in
direct coordination with AFESD member-state representatives
and not at the request of the UN or other international
organizations and NGOs. He added that AFESD's flexibility
allowed it to review and approve funding requests within a
broad framework of economic development projects, including
even the construction of luxury hotels if such construction
was deemed beneficial to a country's economic growth and
stability.


Background Info on Kuwait and Arab Funds
--------------


7. (U) The Kuwait Fund for Arab Economic Development (KFAED)
is the GOK's primary vehicle for providing assistance and aid
to other countries. It was founded the same year that Kuwait
gained its independence, 1961, and was originally intended to
assist Kuwait's Arab neighbors. In 1974 its mandate was
expanded to include all developing countries. To date, KFAED
has committed over 11.5 billion USD (17 percent to African
countries) in low interest loans to 101 countries through 650
separate projects, has provided over 323 million USD in
grants and technical assistance, and has contributed 1.15
billion USD to other development institutions. Interest
rates on loans range from as little as 1 percent to 3.2
percent with a 23 year maturity period and a 3 year grace
period. Additional information on KFAED's programs is
available at its official website: www.kuwait-fund.org.


8. (U) The Arab Fund for Economic and Social Development,
aka "The Arab Fund" was established in 1972 and became
operational in 1974. It is an autonomous "Pan-Arab"
development finance organization providing concessionary
loans to governments, public enterprises and corporations,
giving preference to projects deemed vital to the Arab world
and to inter-Arab projects. The Arab Fund is comprised of 21
Arab member states, each with a "governor" serving as the
country representative to the organization. Since its
inception, 63 percent of its loan commitments have been to
infrastructure development, the remainder was provided to
"productive sector" programs (industry, mining, agriculture,
rural development),comprising approximately 27 percent, and
"social service" (health, education, housing and social
development),comprising approximately 9 percent. Additional
information on The Arab Fund's programs is available at its
official website: www.arabfund.org

LEBARON