GOK STILL GEARING UP FOR ECONOMIC REFORM

UNCLAS KUWAIT 004643 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/ARPI SWALKER AND RSMYTH, EB/FO FOR JSALOOM STATE PLEASE PASS TO USTR FOR PBURKHEAD AND JBUNTIN STATE PLEASE PASS TO USPTO FOR JNESS AND PFOWLER LONDON FOR LTSOU E.O. 12958: N/A TAGS: ECON ETRD PREL EFIN EINV BEXP KU SUBJECT: GOK STILL GEARING UP FOR ECONOMIC REFORM This cable is sensitive but unclassified; please protect accordingly. Not for Internet distribution. ¶1. (SBU) Ambassador met with Advisor to the Prime Minister Dr. Yousef Al-Ebraheem on October 26. Among other issues, they discussed the slow pace of Kuwait's economic reform and the stalled TIFA process. Al-Ebraheem acknowledged that the GOK carried as much responsibility as did the parliament in affecting the changes needed for reform. He predicted progress in privatization and the new tax law by summer 2006. End Summary. ¶2. (SBU) On October 26, Ambassador met with Advisor to the Prime Minister Dr. Yousef Al-Ebraheem at the Advisor's office in the Seif Palace. Among other issues, they discussed the slow pace of Kuwait's economic reform, despite the opportunity offered by the TIFA process to move to an eventual FTA. "We have to start somewhere," Al-Ebraheem said. He explained that it wouldn't do to always blame the National Assembly membership for dragging its collective feet, that the government itself had to take responsibility for reform. ¶3. (SBU) Al-Ebraheem recounted how he had encouraged Minister of Commerce and Industry Abdulla Abdulrahman Al-Taweel to have the Council of Ministers establish a reform steering committee and second university professors with economics and trade experience to that body. "We need progress on GCC matters, with the EU, the FTA with Singapore and related things," he observed. His proposal would have the professors on sabbatical for at least a year to provide continuity in their economic reform program development work. ¶4. (SBU) "We would like to see significant economic reform before the end of the year, but that's not realistic," Al-Ebraheem complained, saying that "much depends on the political process, not just the markets." He then ticked off major areas of reform in which he thought there could be progress by summer 2006. Topping the list was Project Kuwait, a multibillion dollar program to double the output of Kuwait's northern oil fields to 900,000 barrels/day. ¶5. (SBU) He also said a new corporate tax law, that would apply a common tax structure to both foreign companies and their now-exempt Kuwaiti competitors, could be in place before the coming summer. Next, he stated that the government procurement law "which we (in the Council of Ministers meeting) discussed last week and sent to Parliament with changes," a likely candidate for approval. Privatization also was a key Al-Ebraheem concern, and he cited the privatizing of Kuwait Airways an important objective. Kuwait's seaports, too, should go to the private sector with competition among firms, he said. Al-Ebraheem said that building a new airport, in addition to a major overhaul of existing structures, is a necessary step in making Kuwait a regional hub for cargo flights. ¶6. (SBU) Ambassador concurred in each of Al-Ebraheem's points and recommended --in order to move the TIFA process along - that Kuwait follow Oman's example and hire competent, well-established consultant support in Washington. One way to move the "stalled process" along, he said, would be to have the GOK senior economic and trade policy officials visit with U.S. counterparts. ******************************************** Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LEBARON