COUNCIL OF REPRESENTATIVES FINANCE COMMITTEE CHAIR

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003655 SIPDIS SIPDIS E.O. 12958: DECL: 09/28/2016 TAGS: ECON EFIN ENRG PGOV PREL IZ SUBJECT: COUNCIL OF REPRESENTATIVES FINANCE COMMITTEE CHAIR LOOKS FOR U.S. ADVICE REF: BAGHDAD 3453 Classified By: Economic Minister Counselor Daniel Weygandt for reasons 1.4 b and d. ¶1. (C) Summary: Chair of the Finance Committee at the Council of Representatives, Mr. Ayad Al-Samarai described committee priorities, interests, and training needs with Emboffs on September 26th 2006. Mr. Al-Samarai, a leading member of the Iraqi Islamic Party (Tawafuq),welcomes USG advice and support, and stated a clear need for capacity building. He sought our opinion on the Investment Law, discussed the Hydrocarbon Law, and said that the CoR has not yet received the 2007 budget from the Minister of Finance. End Summary. -------------- The Investment Law and Banking in Iraq -------------- ¶2. (C) In a cordial meeting with Deputy Econcouns, Acting Treasury Attache and Econoff, CoR Committee Chairman Ayad Al-Samarai and member Alaa Al-Sadon (IIP/Tawafuq) discussed the committee,s functions and the upcoming legislative calendar. The CoR planned to hold a second 'first reading' of the Investment Law on September 26th, 2006 (reftel),but the reading was delayed until early October. Mr. Al-Samarai said that his committee was still working on comments on the existing draft of the investment law, and asked for the USG view of the draft. Deputy Econcouns said that the key goal should be to create a business climate that will attract investors, emphasizing that international competition for capital is stiff. ¶3. (C) Mr. Al-Samarai was concerned that Iraqi businesses would be overwhelmed by foreign competition. While acknowledging the benefits of foreign investment, he questioned the likelihood of non-Western companies, like the Chinese, of wanting to hire any local labor. The banking sector, he argued, was weak and largely unused by the Iraqi population. (Note: with a negative real interest rate, it is not surprising that deposits are low. End note.) Acting Treasury Attache offered to arrange a meeting for the Finance Committee with the IRMO banking expert, to discuss ways to improve the Iraqi banking sector, an offer that was readily accepted. -------------- Hydrocarbon Law -------------- ¶4. (C) In response to a question, Mr. Al-Samarai said that the oil sector has been kept secret from the public for the past 30 years, so Iraqis need more public debate about it. Because oil signifies great potential wealth, it must be managed effectively. He still had seen no draft law from the Ministry of Oil and thinks that the Ministry of Oil should lead the debate on how best to manage this resource. Mr. Al-Samarai noted that this law involves many difficult issues. When asked what the Sunni views on the law were, he said that the federalism issue will have to be determined before Iraqis can tackle the hydrocarbon law. Deputy Econcouns noted the importance of oil revenues to Iraq's future development and urged the GOI and the CoR to move forward quickly on the law. -------------- Corruption and the Iraqi Budget -------------- ¶5. (C) Discussion then turned to budget issues. While the Finance Committee has seen the 2007 Budget Strategy, members have not yet received the detailed draft of the 2007 budget from the Ministry of Finance. Mr. Al-Samarai listed oversight of the Ministry of Finance as the primary responsibility of the Finance Committee, noting serious concerns about corruption and misuse of funds. When asked about execution of the 2006 budget, Mr. Al-Samarai readily agreed that it was a problem. He has received complaints from many contractors who said they were not being paid for their work. When he made inquiries, he was told in one case that the "system" was being changed, so disbursements had been slowed. He considered that explanation "nonsense" and asked rhetorically how the businessmen could afford to take government work under such circumstances. Overall, he considers a lack of government capacity and bureaucratic rules as the main reasons for the difficulty in executing the budget. He noted that the Committee is still getting started. It is, for example, preparing to meet with the Minister of Oil for the first time. -------------- Comment BAGHDAD 00003655 002 OF 002 -------------- ¶6. (C) Mr. Al-Samarai and Ms. Al-Sadon are clearly focused on doing a thorough job in their Committee. They genuinely looked forward to continued contacts with Post to discuss issues facing the Finance Committee. Mr. Al-Samarai realizes that he lacks experience in financial areas and wants to build his understanding through discussion of the U.S. and international financial systems. Emboffs plan on meeting with other members of the committee as well. End Comment. -------------- Bio Note -------------- ¶7. (C) Mr. Ayad Saleh Mahdi Al-Samarai was born in Baghdad on January 6, 1946, and is a senior member of the Iraqi Islamic Party. He graduated from Baghdad University with a BS in Engineering in 1970, and worked in Baghdad, Jordan, and the UAE. He speaks English well. He is Sunni. ¶8. (C) Ms. Alaa Abdulla Hamud Al-Sadon was born in Basrah on May 17, 1956. A member of the Iraqi Islamic Party, she is Sunni and speaks English. She is married to Naseer Al-Ani, a senior member of the Iraqi Islamic Party and a member of the National Reconciliation Commission. End Bio Note. KHALILZAD