IRAQ COMPACT: TREASURY DEPUTY SECRETARY MEETING

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 004312 SIPDIS SIPDIS TREASURY FOR U/S ADAMS E.O. 12958: DECL: 11/01/2016 TAGS: PGOV PREL EAID ECON EFIN ETRD EINV LE IZ KU SUBJECT: IRAQ COMPACT: TREASURY DEPUTY SECRETARY MEETING WITH KUWAIT FUND REF: KUWAIT 4291 Classified By: Ambassador Richard LeBaron for reasons 1.4 (b) and (d). ¶1. (C) Summary: On October 31, Deputy Secretary of Treasury Robert Kimmitt met with Kuwait Fund Director General Abdulwahab Ahmed Al-Bader on the margins of the International Compact for Iraq Preparatory Group meeting in Kuwait. The meeting was also attended by Treasury Deputy Assistant Secretary for Africa and the Middle East Ahmed Saeed, Kuwait SIPDIS Fund Director for Africa and the Middle East Marwan Al-Ghanim, and EconOff (notetaker). Kimmitt clarified that contrary to earlier comments by GOK officials, the GOI has indeed disbursed some of the funding provided by the Fund to Iraq, though the GOI still needs assistance in the area of budget execution and combating corruption. Al-Bader outlined the challenges in providing assistance to Iraq and thought a series of donor meetings in the near future to facilitate information-sharing on ongoing projects would be useful. End Summary. ¶2. (C) D/S Kimmitt thanked the Kuwait Fund for organizing the Iraq Compact, a politically symbolic event, particularly on short notice. He then asked DG Al-Bader to convey a message to both the Deputy Prime Minister and the Kuwaiti Minister of Finance (reftel). During separate meetings, both stated that none of the Kuwaiti funds pledged previously to Iraq have been disbursed. He clarified $75 million has been disbursed: $65 million in humanitarian assistance and $10 million into the International Reconstruction Fund Facility for Iraq (IRFFI). Not all has been disbursed, Kimmitt explained, but at least this is a start. ¶3. (C) In response, DG Al-Bader noted this statement was both right and wrong. The Kuwait Fund has two mandates: 1) concessional loans, and 2) grants. Projects were identified over a year ago, he said, but they are only now reaching the stage where the Fund will be selecting contractors. He linked the delay to a combination of changes in the project location, difficulty finding a contractor, and a poor exchange of information overall. Moreover, as Al-Bader said he had noted to Iraqi Minister of Planning Baban, the Iraqis lack the basic feasibility studies required to undertake large projects like infrastructure development. He also noted that even those projects for which there are studies the Iraqis have difficulty understanding why a study from the 1980s can not be used now. ¶4. (C) Al-Bader confirmed that the Kuwait Fund is willing to give grants to conduct studies for future projects. He also said that he expressed to the Iraqis a willingness to hold two conferences in the future: 1) a meeting with Arab donors to solicit aid; and 2) a conference with donors to facilitate the flow of information on ongoing projects and lessons learned. The first meeting, Al-Bader clarified, would be bilateral or regional, but the latter could be a meeting on a specific project. The Kuwait Fund would even favor greater consideration of Iraqi projects at regularly scheduled bi-annual Arab donors coordination meetings, but the Iraqis need to be more responsive to donors' requests for information. Kimmitt thanked Al-Bader for the Kuwait Fund offer. In turn, Kimmitt noted that Treasury would enhance its dialogue with Arab bilateral and regional funds. He added that Al-Bader has a wealth of experience and such meetings "would be a powerful incentive to the Iraqis." ¶5. (C) Known challenges facing Iraqi efforts secure additional pledges, Kimmitt said, are budget execution and corruption. There has been no execution of the capital investment budget, and the Iraqis have not taken advantage of large pledges. On corruption, he stated that there is still siphoning of oil at the source, although there is greater control over the spending of oil revenues. ¶6. (C) Of the daunting task ahead in Iraq, DG Al-Bader noted that if one were to think about everything that had to be done, one would not be able to get anything done. Instead Kuwait has decided to focus on five areas: 1) infrastructure development (including electricity),2) education, 3) health care, 4) sewage, and 5) transportation. For now, Al-Bader said Kuwait's goal is to identify one project quickly, preferably electricity, but Kuwait needs more information from the Iraqis. ¶7. (C) When asked about providing technical assistance on the ground, Al-Bader noted that security makes that difficult. Unfortunately, the Iraqis "are not used to working with consultancy firms." Kimmitt noted that the KUWAIT 00004312 002 OF 002 Iraqis early success in implementing projects should be used as models for future endeavors. ¶8. (C) Deputy Secretary Kimmitt has cleared this message. ******************************************** For more Embassy Kuwait reporting, see: http://www.state.sgov.gov/p/nea/kuwait/index. cfm?cables Or Visit Embassy Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ******************************************** LeBaron