NATIONAL BANK NOT OPTIMISTIC ABOUT PROSPECTS OF

C O N F I D E N T I A L KUWAIT 001412 SIPDIS SIPDIS STATE FOR NEA/ARP LONDON FOR TSOU USTR FOR JBUNTIN E.O. 12958: DECL: 09/17/2017 TAGS: ECON KU SUBJECT: NATIONAL BANK NOT OPTIMISTIC ABOUT PROSPECTS OF GCC MONETARY UNION Classified By: Charge d'Affaires Alan G. Misenheimer for reasons 1.4(b) and (d) ¶1. (SBU) In a September 16 courtesy call with the National Bank of Kuwait (NBK),CDA met with Bank CEO Ibrahim Dabdoub and Chief Economist Randa Azar-Khoury. (NBK is the largest bank in Kuwait and the fifth largest Arab Bank with 2006 net profits of USD 875.8 million and USD 27.32 billion in assets. Dabdoub has been CEO of NBK since 1983 and has been with the Bank since 1961. Dabdoub and Azar-Khoury are highly respected economists and leaders in the Kuwaiti financial sector). ¶2. (SBU) Azar-Khoury said that she does not believe a GCC monetary union is possible by 2010. She clarified that even if a single currency is introduced in the GCC, an integrated monetary system is not realistic anytime soon. She told CDA that none of the GCC countries is prepared for a large-scale change. In Kuwait there are no plans to implement new systems to accommodate a currency change let alone an overall integration of Kuwait's monetary system with the rest of the GCC. She added that there are currently no plans in place to harmonize or coordinate monetary policy within the GCC. She also pointed out that significant barriers to doing business within the GCC still exist in all countries. She cited problems faced by NBK in trying to open branches in Saudi Arabia and Dubai as examples of barriers to intra-GCC business. She suggested that the approach to regulating capital markets also varies significantly between the countries. She was not optimistic about meaningful integration on monetary policy in the near future even if a single currency becomes a reality. ¶3. (C) Azar-Khoury and Dabdoub expressed concerns over the lack of commercial and financial reforms in Kuwait. Dabdoub pointed out that the Kuwait National Assembly has not passed any commercial or financial legislation in the past two years. He pointed to growing Islamist influence in the National Assembly as the primary reason for lack of meaningful reforms in relevant sectors. Echoing comments we often hear from candid GOK contacts, Dabdoub lamented the drift and indecisiveness of the senior GOK leadership as a major spur to irresponsible criticism by opposition elements. ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * MISENHEIMER