ACHIEVING DIALOGUE WITH ISLAMIC DEVELOPMENT BANK

C O N F I D E N T I A L SECTION 01 OF 04 JEDDAH 000149

SIPDIS

SIPDIS

RIYADH, PLEASE PASS TO DHAHRAN; DEPARTMENT FOR NEA/ARPI;
PARIS FOR ZEYA; LONDON FOR TSOU

E.O. 12958: DECL: 02/12/2015
TAGS: EAID IZ KISL KPAL PK PREL SA SOCI
SUBJECT: ACHIEVING DIALOGUE WITH ISLAMIC DEVELOPMENT BANK

REF: A. SECSTATE 10623

B. E-MAIL OF 7 FEBRUARY 2006 FROM ALEXI MONSARRAT

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Classified By: Consul General Tatiana Gfoeller, for reasons 1.4 (b)
and (d).


1. (C) SUMMARY. On February 7, Consul General Gfoeller and
Jeddah Pol/Econ Chief met with President of Islamic
Development Bank (IDB) Al-Madani and senior staff members.
CG delivered points in ref B. Al-Madani and his associates
were cordial and forthcoming. In a wide ranging conversation
Al-Madani outlined current IDB operations in Iraq,
Afghanistan, and Pakistan. He also described program
selection, implementation and auditing procedures within the
IDB. The President welcomed the prospect of cooperation with
USG aid organizations and immediately named a senior official
of the Bank to act as point of contact with Consulate General
Jeddah. The President promised to supply reports on IDB
activities to ACG Jeddah. In a subsequent telephone
conversation on February 12, an IDB official made preliminary
plans for a meeting in March, during which Pol/Econ Chief
would meet IDB Divisional Directors. END SUMMARY.

MEETING AND BIOGRAPHICAL NOTE


2. (C) On February 7, 2006 Consul General Gfoeller and
Jeddah Pol/Econ Chief met with Islamic Development Bank (IDB)
President Al-Madani, Dr. Mohammed Hassan Salem, Head, Special
Assistance Office and IDB official, Zaffar Saleem, at the
richly-appointed headquarters of the IDB in Jeddah. The
purpose of the meeting was to seek to develop a dialogue
between the IDB and USG as directed in ref A.


3. (U) Biographical note: Ahmad Mohamed Ali Al-Madani was
born in Madinah, Saudi Arabia in 1928. His primary and
secondary education was obtained in Saudi Arabia. He
received a B.A. in Commerce from Cairo University in 1957 and
a law degree from the same institution in 1959. He later
studied in the United States, obtaining an M.A. in Public
Administration from the University of Michigan-Ann Arbor, in

1962. He then received a Ph.D in Public Administration in
Fiscal Management from State University of New York, Albany
in 1967. Al-Madani held a variety of posts in the Saudi
Ministry of Education between 1958 and 1967. In that year,
he became Acting Rector of King Abdulaziz University; a
position he held until 1972. From 1972 until 1975, Al-Madani
was Deputy Minister of Education for Technical Matters. In
1975 he became the first Director of the newly founded
Islamic Development Bank. In 1993 Al-Madani left the IDB to
become Secretary General of the Muslim World League. He
returned to the Directorship of the Islamic Development Bank
in December 1995 and has held the position since that date.
Al-Madani is a widely respected figure in Saudi Arabia. He
was a moderator at the Jeddah Economic Forum, held February
11-13. His appearance was met by an effusive introduction
and a prolonged round of applause from the audience. End
Biographical note.

CONSUL GENERAL RECEIVES CORDIAL AND CANDID MEETING


4. (C) Al-Madani's reception of Consulate officers was very
cordial. He welcomed USG interest in developing a routine
procedure for maintaining contact between the IDB and USG
through Consulate General Jeddah. In the course of the
meeting, he named Dr. Mohammad Hassan Salem as the primary
point of contact for the Consulate General at the IDB. He
promised to forward the name of another bank officer as an
alternative contact. The primary contact at Consulate
General Jeddah will be the Pol/Econ Chief. Al-Madani further
directed that Bank reports be sent to U.S. Consulate General
Jeddah.

OPPORTUNITY FOR ADDITIONAL DIALOGUE IN MARCH


5. (C) Since this meeting, ACG Jeddah has already received
several notices of projects funded in part by IDB and
operating in the United States over the past several years.
The documents indicate that they had been furnished to

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AmEmbassy Riyadh earlier. In a telephone conversation on
February 12, IDB official Zaffar Saleem and Pol/Econ Chief
made preliminary arrangements for the latter to visit the IDB
in March and meet IDB Divisional Directors in order to
enhance future dialogue. (Note: Saleem is an American
citizen, long associated with the Consulate General and other
American organizations in the region. He was instrumental in
arranging the February 7 meeting and has been tireless in
promoting American ties with Saudi Arabia and the IDB. End
note.)

AID TO IRAQ


6. (C) In discussing IDB activities in Iraq and Afghanistan,
Al-Madani pointed out that they are both members of the IDB.
He assured CG that the IDB is engaged only in humanitarian
projects in Iraq. The IDB has recently concluded a
Memorandum of Understanding with the Iraqi government to
settle projects outstanding from the Saddam Regime. He
announced that approximately two weeks ago, IDB and Iraq
agreed on a new project for the construction of schools
throughout the country. These projects are being constructed
on the basis of loans.

AID TO AFGHANISTAN


7. (C) Before the American invasion, Afghanistan was the
recipient of IDB assistance operations. They have
resurrected this relationship with the Karzai government.
The IDB now believes that its activities in Afghanistan have
returned to normal, offering both grants and loans. The
primary objective of these projects is construction of roads
and schools.

AID TO PAKISTAN EARTHQUAKE VICTIMS


8. (C) In response to the rapidly deteriorating conditions
among earthquake survivors in Pakistan, the IDB is making a
concerted effort to supply tents for shelter, including tents
specially designed to house schools and hospitals. The
President is taking a personal interest in this effort. He
related that while traveling a few weeks ago, he saw an
article in the International Herald Tribune which showed
Pakistani children attempting to study in the frigid weather.
Al-Madani thereupon personally directed the bank to hasten
shipments of tents to the area, including to the village
cited in the widely disseminated article. He told the CG he
hopes to visit the town himself in two weeks when he is in
Pakistan to visit President Musharraf.

AID TO PALESTINE AUTHORITY


9. (C) The Palestine Authority is also a member of the IDB.
Al-Madani stated the Bank will continue to deal with the
Palestinian Authority. The CG assured the officials present
that the USG wished to continue to assist Palestinians,
working through President Abbas. She then asked IDB how it
planned to work with HAMAS, a group identified by the
international community as terrorists. Al-Madani's answer
was circumspect. He stated that the national government
designates the authorities with which the IDB operates. He
was uncertain of the formula for dealing with outsiders. He
then changed the subject, relating that he was encouraged
that Israel was continuing to transfer funds to the PA.


10. (C) COMMENT: From the President's elusive statements
(contrast information above with description of project
management process in paragraph 12),it is clear that the IDB
realizes the delicacy of the situation. They do not want to
transfer funds to proscribed groups, but they are also
anxious to assist the Palestinians. They appear to be
casting about for a solution that is acceptable to the
international community, but which allows the Bank to
continue providing aid to the Palestinians. If USG could
suggest a formula, it is conceivable that the IDB would be
willing to adopt those safeguards. END COMMENT.

MANAGEMENT, PROJECT SELECTION, AUDITS AND OTHER PRECAUTIONS

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11. (C) This introduced the subject of Bank membership,
management, project selection and auditing standards adopted
by the IDB to forestall the improper use of funds. Al-Madani
claimed that the Bank's operations are "completely
transparent." Membership in the IDB is predicated on
membership in the Organization of the Islamic Conference
(OIC). All OIC members are presumed to be qualified for
membership in the IDB. Prospective members then must ratify
the IDB agreement and make an investment in the capital of
the Bank. All member-states have a representative on the
Board of Governors which meets annually (the next annual
meeting will be in Kuwait about May 30, during which the
latest annual report will be presented) and an Executive
Board, responsible for day-to-day management, which meets at
approximately 6 week intervals. During either of these
meetings any member may raise questions or request a review
of a project. The bank does not permit cash transactions.
It makes payments directly to contractors, rather than
supplying funds to the project beneficiary. On some
occasions, Al-Madani related, the IDB will reimburse a member
government for project expenses already incurred by the local
authorities.

PROJECT SELECTION AND IMPLEMENTATION


12. (C) Most, but not all, projects occur within member
states. Potential projects may be proposed by a member
country, be nominated by identification missions sent out by
the IDB, or as a result of meetings with other aid agencies.
The executive board debates prospective projects and then
votes on selection. Implementation is a joint undertaking
between the bank and member states. Members contribute to
and monitor the projects. All projects are undertaken with
the knowledge and cooperation of the local, national
government. The national authorities must give a clearance
for all projects before the Bank will grant its approval.
IDB projects may be carried out with local partner
organizations, but all internal activities are made known to
and monitored by the host country authorities, which have a
veto over organizations with which the IDB partners.


13. (C) COMMENT: While the bank's operations generate a
paper trail, this trail is only as good as the paper it is
printed on. Substantial autonomy appears to be accorded to
member governments in designating the organizations with
which the IDB may develop projects, and it is not yet clear
who conducts the audits. It may be that oversight is only as
good as the host government is willing to enforce. There was
reluctance to question the actions of implementing partners
and the contents of audits may be accepted at face value.
END COMMENT.

MADRASES AND HATE LITERATURE


14. (C) In reply to the CG's inquiry into the possibility
that IDB funds could be used by mosques to propagate hate
speech and literature, the President responded immediately
that the IDB does not fund mosques. However, after
clarification, it transpires that IDB will not finance
mosques, but it will finance madrases that are attached to
mosques. The IDB distances itself from this issue, which it
professed to deplore, by pointing out that it only provides
assistance in funding construction and does not support
operations. The curriculum, Al-Madani asserted, is dictated
by local authorities. However, he also noted that IDB funded
schools must be formally non-sectarian. The IDB insists that
everyone be admitted to schools they finance, without regard
to race, nationality, or religion; although, as a practical
matter, in most regions in which the IDB operates, the
population is virtually all Muslim. COMMENT: Under these
procedures, it would remain for the U.S. and others seeking
to restrain hate speech to find ways to directly or
indirectly pressure the local educational authorities. END
COMMENT.

IDB RELATIONS WITH KINGDOM OF SAUDI ARABIA GOVERNMENT


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15. (C) The IDB was established in 1975 by 22 founding
member states, including the Kingdom of Saudi Arabia. The
Saudi government is the largest contributor of the current 57
member states, contributing approximately 25% of the Bank's
capital and budget. KSA is also the host country and
operations are governed by a host country agreement. There
are 7 major shareholders including Saudi Arabia, Kuwait,
Libya, Turkey, Iran, Egypt, and UAE.
Gfoeller