U.S.-ISCI ECONOMIC DIALOGUE: PRIVATE SECTOR

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 001707

SIPDIS

SIPDIS

E.O. 12958: DECL: 05/22/2017
TAGS: ECON EFIN PGOV IZ
SUBJECT: U.S.-ISCI ECONOMIC DIALOGUE: PRIVATE SECTOR
DEVELOPMENT

REF: BAGHDAD 1569

Classified By: Economic Minister-Counselor Daniel Weygandt for reasons
1.4 (b) and (d).


1. (C) Summary: Participants at the second meeting of the
U.S.-ISCI economic dialogue discussed U.S. agriculture and
micro-credit programs and the need for private sector
development. (Note: At a party conference on May 10 and 11,
SCIRI decided to change its name to the Supreme Iraq Islamic
Council - al-majlis al-alya al-Islamiya al-Iraqi; ISCI. End
note.) ISCI representatives also offered assistance in
developing local partnerships and resolving problems. They
indicated interest in more information on the fuel
availability monitoring work at the embassy and textile
developments in other countries in the region, which will be
topics for future sessions. The dialogue provides a useful
opportunity to focus a key political player on the challenges
in Iraq to economic growth and development and the importance
of ending the violence, the key impediment to that growth.
End Summary


2. (C) The second US-ISCI economic dialogue took place on
May 16 at the residence of Vice President Adel Abdel Mehdi.
Vice President Abdel Mehdi welcomed the group at the
beginning and joined again towards the end. While he was out
of the room, his advisor Ambassador Mohammed Ali Al-Hakim
chaired the meeting, which also included VP and Minister of
Finance Advisor Azez Jafar, and VP Advisor Zuhair Humadi.
The U.S. side consisted of the Economic Counselor as chair,
USAID Acting Director, ITAO Chief of Staff and Emboffs. The
committee agreed to meet again in two weeks, and the next
session will include a presentation of the U.S. Mission's
Fusion Cell activities.

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VP'S ASSESSMENT OF THE FIRST SESSION
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3. (C) The Vice President gave his written assessment of the
first meeting to Mohammed Ali Al-Hakim, who read aloud the
VP's summary of the following topics: moving Iraq from
reconstruction to growth, fighting unemployment and promoting
private businesses; identifying problems; developing civil
society institutions, particularly in the south; and
strengthening the Council of Representatives and the
government's ability to pass and implement laws.
EconMinCouns thanked the Vice President for raising the issue
of passing and implementing effective legislation. He noted
that we are interested in learning how we can assist in
ensuring that the hydrocarbon law is passed through the
Council of Representatives. The VP's summary also noted the
importance of executing the government budgets. VP Abdel
Mehdi said that given the demographics in Iraq where 48% of
the population is under 18 and 65% is under 30, it is
important to support the private sector as the solution to
unemployment.

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U.S. ECONOMIC ACTIVITIES
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4. (C) As requested in the first meeting of the U.S.-ISCI
economic dialogue (reftel),we prepared a discussion paper on
the U.S. economic strategy in Iraq, with illustrative
examples of key activities. Questions in the dialogue
centered on the agricultural projects and the micro-credit
programs. Acting USAID Director said that a new agricultural
project had just been awarded, and welcomed input into the
design phase of the work in June. He also gave an overview
of the existing U.S. micro-credit work throughout the
country. Azez Jafar noted that the Iraqi program on
micro-credit included subsidized interest rates, which Azez
said he convinced the International Monetary Fund to permit.
Acting USAID Director also mentioned the work the USG is
doing in the banking sector, highlighting the Banking
Conference in Amman in early April.

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BUDGET EXECUTION
--------------


5. (C) EconMinCouns emphasized the importance of budget
execution, as noted by the Vice President, and said it was
difficult to encourage international donors to assist Iraq if
the country seemed unable or unwilling to spend its own
funds. Azez Jafar said that the DFI (Development Fund for
Iraq) account had decreased from $10 billion to $5 billion,
evidence that the spending units were getting the money that
they needed. He said that the Minister of Finance will meet
with each minister in the coming two weeks to review
progress. "We are improving," Azez Jafar said.

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THE PRIVATE SECTOR
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6. (C) Zuhair Humadi raised the need to focus on specific
projects, and identify problems within the Iraqi bureaucracy.
He suggested textile factories and English language
institutes as possible focus areas. Azez Jafar said that
Small and Medium-Sized Enterprises would provide good
employment generation and opportunities for the private
sector. Acting USAID Director noted that the new
agricultural program will be focused in certain geographic
areas, in order to develop market access and agro-business
opportunities.

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NEXT TOPICS AND COMMENT
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7. (C) The group agreed that future sessions would include
topics such as the Embassy's Fusion Cell (which monitors and
supports fuel availability),regional experience in textiles,
and provincial engagement. Mohammed Ali Al-Hakim also noted
that the ISCI side could present their work on the oil and
gas, and agricultural sectors. The Vice President offered to
set up meetings with provincial leadership at any time. Post
will invite the director of the Office of Provincial Affairs
and the head of the Embassy's Fusion Cell to future meetings.



8. (C) Comment: This dialogue is a useful exchange of ideas,
and a chance to broaden discussions beyond the current crisis
of the day. We hope that we can conduct similar dialogues
with other political parties. Outside events do affect the
group; two members at the first meeting were unable to attend
the second because they could not get through the checkpoints
quickly enough. VP Advisor Mohammed Ali Al-Hakim noted that
the International Zone felt less secure, and two rockets hit
outside his house the previous day. Luckily, he said, a date
tree protected his house. By May 16, the day of the meeting,
it had become clear that ISCI leader Abdul Aziz Al Hakim
would be traveling to the U.S. for urgent medical treatment,
perhaps explaining the Vice President's preoccupation.
CROCKER