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.

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The Investment Law and Banking in Iraq
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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.

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Hydrocarbon Law
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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.

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Corruption and the Iraqi Budget
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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.

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Comment

BAGHDAD 00003655 002 OF 002


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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.

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Bio Note
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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