OPIC-BACKED LOAN GUARANTEE PROGRAM LAUNCHED

UNCLAS JERUSALEM 001575 SIPDIS SENSITIVE SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/SHAMPAINE/BELGRADE; NSC FOR ABRAMS/WATERS; TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON; PASS OPIC FOR DRUMHELLER/BEQUAI E.O. 12958: N/A TAGS: ECON EFIN EINV ETRD KWBG SUBJECT: OPIC-BACKED LOAN GUARANTEE PROGRAM LAUNCHED ¶1. (SBU) Summary. The Overseas Private Investment Corporation (OPIC),the Aspen Institute, and the Palestine Investment Fund (PIF) signed a loan guarantee agreement on July 25 that will leverage up to USD 228 million in loans to small and medium-size Palestinian enterprises (SMEs). The agreement establishing the initiative, known as the Middle East Investment Initiative Program (MEII),was signed by OPIC President Robert Mosbacher on behalf of the U.S. U/S Karen Hughes, who witnessed the signing with President Abbas (Abu Mazen),declared that the MEII is indicative of USG efforts to shore up the Palestinian economy and help stabilize the region. Abbas remarked that he would welcome similar project launches on a weekly basis. End Summary ¶2. (SBU) OPIC President and CEO Robert Mosbacher, Aspen Institute chairman Berl Bernhard, and PIF CEO Mohammed Mustafa signed a loan guarantee framework agreement July 25 that will leverage up to USD 228 million in loans for Palestinian SMEs. The signing ceremony took place at the Presidential Compound in Ramallah. Abu Mazen, Under Secretary of State Hughes, Mosbacher, Bernhard, and Mustafa SIPDIS took turns praising the program. Prime Minister Fayyad also witnessed the signing. The Consul General and the Norwegian Special Envoy for the Middle East Svein Sevje also attended. Evidence of USG Commitment -------------- ¶3. (SBU) In her remarks, U/S Hughes noted that President Bush renewed the USG's commitment to the peace and security of the Palestinian people in his July 16 speech. She said that President Bush and the American people know that "it is crucial to improve the living conditions and the economic opportunities for the Palestinian people." She emphasized that the MEII embodies this commitment by providing much-needed loans to SMEs, many of them family-owned. U/S Hughes noted that the program presents an opportunity for Palestinians, particularly small business owners, to set the course of Palestinian economic development. Mosbacher said the MEII will infuse much needed investment funds into the Palestinian private sector, allowing even small business owners to use their own talents and energy to improve conditions for themselves and their families. ¶4. (SBU) Abu Mazen emphasized that the Palestinian people and economy are in real need of projects. He praised the MEII and called on Palestinian banks to facilitate these loans as a means of boosting the Palestinian economy. He expressed his hope that a new project will be signed every week. The bulk of Abu Mazen's remarks, however, were devoted to condemning Hamas actions in Gaza. He also cautioned against differentiating between the West Bank and Gaza. Program Details -------------- ¶5. (SBU) The MEII consists of a USD 110 million guarantee from OPIC and a USD 50 million guarantee from the PIF. The Norwegian government is providing USD 5 million over 5 years for operating costs and training. The Aspen Institute has raised funds from American, European, and Arab donors to operate and manage the initiative. The U.S. NGO CHF International will manage the program locally, working closely with participating banks. ¶6. (SBU) By guaranteeing 70 percent of loan principal, the USD 160 million will be able to leverage up to USD 228 million in credit. The remaining 30 percent will be covered by the lending bank. Loans will range from USD 10,000 to USD 500,000. A local advisory board for the MEII comprised of prominent members of the private sector held its inaugural meeting July 25, after the signing ceremony. WALLES