AMBASSADOR CALLS ON HEAD OF KUWAIT STOCK EXCHANGE

UNCLAS SECTION 01 OF 02 KUWAIT 004598

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/ARP
TREASURY FOR DAS AHMED SAEED AND JONATHAN ROSE

E.O. 12958: N/A
TAGS: EFIN KU PINR PREL KTFN
SUBJECT: AMBASSADOR CALLS ON HEAD OF KUWAIT STOCK EXCHANGE



1. (SBU) Summary: On December 5, Ambassador paid a courtesy
call on the new Director General of the Kuwait Stock Exchange
(KSE) Saleh Al-Falah. Ambassador and the DG discussed the
pending creation of a capital markets authority and Kuwait's
overall economic health. The meeting was also attended by
the Head of KSE Technical Department, Ms. Wafa Al-Rasheed,
and Econoff (notetaker). The call took place amidst a sharp
drop in stock prices following a decision by KSE's Market
Committee to withdraw voting rights from stocks held by the
Al-Kharafi Group, a juggernaut of the KSE, in ten listed
companies. The move banned Kharafi from trading its shares
in these companies for six years. The complaint filed with
the Market Committee alleged that the Al-Kharafi Group had
failed to conform with market regulations in its apparent
efforts to acquire a controlling interest in these companies
without making the required disclosure. End Summary.

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Market Volatility: "People need time"
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2. (SBU) During the courtesy call, DG Salah Al-Falah, who is
described by his colleagues as "a strong Director who will
apply the law," acknowledged that his transition following
the resignation of his predecessor in October has been
anything but routine. He said the KSE is working hard to
please the majority while ensuring that everything is done
according to regulations. "People need to be educated from
the legal point of view," he added, "but this takes time."
Referring to KSE's decision to move against the Kharafi
Group, he said that "you must go step-by-step, and this was
more than they (the investor) could swallow at one time."


3. (SBU) Al-Falah, who has over 20 years of banking
experience and served as Director of Investments at the
Kuwait Investment Authority from 2000-2003, said he was
called out of retirement by the Prime Minister and appointed
DG in October 2006. Al-Falah oversees a staff of 220
employees, about 150 of whom are Kuwaiti, whom he described
as experienced professionals who have been through some tough
times over the last 25 years.

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Creation of a Capital Market Authority
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4. (SBU) When asked about his plans for KSE over the next
year, Al-Falah noted that KSE is ready for regulatory
changes, including a more robust financial disclosure policy
and the creation of an independent regulatory body, but
Parliament has different priorities. Al-Rasheed explained
that there are currently two competing proposals for the
creation of a capital market authority, one from KSE and
another from the Ministry of Commerce and Industry (MOCI).
Although both plans adhere to the principles of the
International Organization of Securities Commissions (IOSCO),
KSE's proposal is based on the English system while MOCI,s
is based on a U.S. model. Parliament is not scheduled to
discuss this issue until September 2007, Al-Falah said, and
the confusion caused by the two proposals will probably
create additional delays.

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Economy is Strong But Sensible Management Key to Success
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5. (SBU) Al-Falah noted that the country is in good
financial shape but cautioned against "political
interference," as exemplified by the current and highly
charged debate on consumer debt, which has a number of MPs
calling on the government to forgive consumer debt. Al-Saleh
said the number of infrastructure projects to be tackled in
Kuwait would significantly reduce Kuwait's budget surplus.

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Bio Note
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6. (U) Al-Falah graduated with a BA in Trade from the Arab
University in Beirut in 1970. He returned to Kuwait for
post-graduate degrees in development planning and banking
studies. He joined Bank of Kuwait and the Middle East in
1974 and rose through the ranks to become Head of Domestic
Corporate Banking by 1980, Deputy General Manager from
1980-1981, General Manager from 1981-1993, and Chairman and
Managing Director from 1993-2000. Al-Falah was also Chairman
of the Kuwaiti Banks Committee from 1998-2000 and Deputy

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Chairman of the Bank of Bahrain and Kuwait from 1998-2000.
He then became Managing Director of the Kuwait Investment
Authority where he remained from 2000-2003 until he retired.
Al-Falah was born on January 8, 1946 and is married. He
speaks Arabic and English.

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LEBARON