DEPUTY PM, EDB CHIEF DISCUSS GROWTH AND TRADE WITH

C O N F I D E N T I A L MANAMA 000197

SIPDIS

SIPDIS

STATE FOR EB, NEA/ARP
USDOC FOR 4520/ITA/MAC/ONE FOR THOFFMAN
USTR FOR JBUNTIN

E.O. 12958: DECL: 02/22/2017
TAGS: ECON ETRD PGOV PREL BA BILAT ECTRD OFFICIALS
SUBJECT: DEPUTY PM, EDB CHIEF DISCUSS GROWTH AND TRADE WITH
COMMERCE DEPUTY SECRETARY

Classified By: Ambassador William T. Monroe for reasons 1.4 (b) and (d)
.

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Summary
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1. (C) Deputy PM Shaikh Mohammed Bin Mubarak told Commerce
Deputy Secretary Sampson February 5 that he welcomed the idea
of a wider regional free trade agreement, but stressed that
problems in Iraq and Iran's ideology of expansion could have
a negative impact on regional economic integration. In
response to the U.S. concern about Arab League boycott
language still appearing occasionally in government
contracts, Shaikh Mohammed assured Deputy Secretary Sampson
that Bahrain was commited to eliminating the language from
all contracts and would handle cases expeditiously as they
arose. In a separate meeting February 4, Economic
Development Board (EDB) Chief Executive Officer Shaikh
Mohammed Bin Isa said that the GOB was trying to maintain a
six to seven percent growth rate that could be sustained over
a 15-year period. Shaikh Mohammed stressed that economic
growth in Bahrain needed to ultimately benefit Bahraini
workers and their families. He cited job creation, including
jobs for skilled Bahraini workers, as an important priority.
Among the continuing challenges Bahrain faces are raising the
skill level of Bahraini workers and decreasing government
subsidies over time. End summary.

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Deputy PM on the Economy, Regional Security
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2. (C) In a meeting with Commerce Deputy Secretary Sampson
February 5, Deputy Prime Minister Shaikh Mohammed Bin Mubarak
Al Khalifa said that Bahrain welcomed the Middle East Free
Trade Agreement, noting that the region will benefit from
enlarging the circle of free trade. However, the problems in
Iraq need to be contained because they have had a
destabilizing effect on the region. Security is the number
one issue for the success of a free trade region and the
threats from both Iraq and Iran jeopardize that success. He
said that Iran still has an expansionist ideology, making the
countries of the region wary. Although Iraq no longer has
similar thoughts of expansion, he recalled former Iraqi FM
Tariq Aziz telling him personally that Iraq had all the oil
it needed and had no reason to pursue its claims over Kuwait.
Iraq invaded Kuwait shortly afterward.


3. (C) Deputy Secretary Sampson raised the problem of
government contracts occasionally containing language
referring to the Arab League boycott of Israel. Shaikh
Mohammed assured the Deputy Secretary that Bahraini officials
were in complete agreement on the need to purge this language
from all contracts and were committed to handling these cases
expeditiously as they arose.


4. (C) Shaikh Mohamed said that Crown Prince Shaikh Salman
Bin Hamad Al Khalifa wants to prepare the Bahraini labor
force for the future. The long-term solution to labor issues
is not to hire expatriate workers at low wages to fill jobs,
but to raise the skill level of Bahrainis to be able to
assume the positions at a higher wage. Shaikh Mohammed
pointed to the success of the Bahrain Institute of Banking
and Finance (BIBF) in training over 8,000 Bahrainis who work
in the banking sector not only in Bahrain but all around the
Gulf. He also mentioned the business incubator program that
has facilitated the start-up of approximately 200 new
businesses in Bahrain.

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Maintaining Sustainable Growth
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5. (C) In a separate meeting on February 4, EDB Chief
Executive Officer Shaikh Mohammed Bin Isa Al Khalifa said
that as GOB officials plan over a 15-year time horizon, they
are attempting to keep Bahrain's growth sustainable at a
level of six to seven percent per year. "We view our growth
like a marathon runner, not a sprinter, so even though we are
experiencing success now, we need to continually monitor the
health of the economy to ensure its endurance." He said that
even in the long term, as oil becomes a smaller part of
government revenues, the goal is to maintain growth at six to
seven percent. He added that private sector investment has
outpaced public sector investment three to one.



6. (C) Shaikh Mohammed contrasted Bahrain's economic growth
with that of the United Arab Emirates by asking, "Who is this
development for?" He commented that Dubai's development was
not really for the benefit of its citizens but to attract
visitors and to build its international reputation. In
contrast, GOB officials see economic growth as important for
Bahraini citizens and want to manage the country's growth in
order to create jobs for the benefit of the widest possible
cross section of the population. Shaikh Mohammed stated that
job creation, including jobs for skilled Bahraini workers,
was an important priority. He pointed to the banking sector
as a success story, saying that between 70 and 80 percent of
its workers are Bahraini.


7. (C) Shaikh Mohammed pointed out that one of Bahrain's
challenges is to prepare the lower levels of the Bahraini
work force for the future, since many lack the skills needed
to be competitive in currently available jobs. He also
mentioned the GOB's intent to wean the public from government
subsidies, citing that 70 percent of those who receive
electricity subsidies should not qualify to receive them,
including himself. Regarding recent consumer price
increases, Shaikh Mohammed said that the government needed to
do a better job of both highlighting what it is doing to help
the needy and moving the public debate about prices from one
that is sectarian to one that is socioeconomic.

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