PRT SALAH AD DIN: SAD DEPUTY GOVERNOR FOCUSED ON

C O N F I D E N T I A L SECTION 01 OF 02 BAGHDAD 003003 SIPDIS E.O. 12958: DECL: 09/18/2016 TAGS: EINV ETRD PGOV ECON IZ SUBJECT: PRT SALAH AD DIN: SAD DEPUTY GOVERNOR FOCUSED ON PRIVATE SECTOR ECONOMIC DEVELOPMENT Classified By: PRT Team Leader R. Bell, Reasons 1.4 (b,d). ¶1. (U) This is a PRT Salah ad Din reporting cable. Summary -------------- ¶2. (C) The Salah ad Din (SaD) Deputy Governor Abdullah Hussein al-Jubara told PRT officers that private sector investments and development are the best way to create further economic progress in SaD. Abdullah reported that plans for construction of the province,s first commercial airport will be ready soon. He asked for USG help to get the GOI to devolve authority to the provinces on two points: 1) empower Governors to allocate land for major investment projects; and, 2) authorize the provinces to deal directly with outside investors. END SUMMARY (SBU) THE BASIC INGREDIENTS FOR ECONOMIC PROGRESS IN PLACE -------------- ¶3. (C) In a 16 September meeting, SaD Deputy Governor Abdullah met with the PRT to discuss his thoughts on how to spur economic development in SaD. Abdullah reviewed his efforts since 2005 to develop an environment that would be conducive to economic progress in the private sector. Abdullah said the basic ingredients for economic development are a private banking system, investment laws that protect rights of both local and foreign investors, security, raw materials and an available pool of laborers. ¶4. (C) Abdullah said that SaD now has all these elements in place and he is focused on attracting private sector investors for large infrastructure projects, such as an airport and hotel. Progress continues on the province,s first commercial airport; the Turkish company overseeing the project is scheduled to have a draft of the airport design plan ready for review on 11 November. Plans are also underway for construction of a new hotel. Abdullah said that within the next month, one of the investors he is working with will begin work on a project to construct a hotel within the palace compound area currently located on CF FOB Danger. (SBU) LOCAL AND NATIONAL RESISTANCE TO OUTSIDE INVESTMENT -------------- ¶5. (C) Abdullah said many local and national authorities who remain hostile to private sector investment projects routinely resist his efforts. He said that some national- level officials in Baghdad have made it clear that they prefer to use public means to fund large infrastructure projects, like airports. As an example of this, Abdullah told the PRT that after he began working on the airport construction project with outside investors, he received a memo from Baghdad questioning the wisdom of the provincial government initiating a project of this size independent from national authorities. He pointed to the airport constructed in Najaf as an example of a successful province-led initiative. Despite the initial reaction from the national government, Abdullah said the Prime Minister has given SaD verbal approval to proceed with the project. ¶6. (C) Abdullah said he also meets with resistance from local officials who remain distrustful of outside investors, referring to them as a bunch of &thieves and merchants.8 Likewise, some members of the Provincial Council (PC) used to favor public sector funding for development projects, but have largely been won over by the rapid economic progress in SaD. (SBU) THE WAY FORWARD THROUGH PRIVATE INVESTMENT -------------- ¶6. (c) Abdullah said that he thought it had been a mistake for SaD to make development initiatives dependent on funding from the U.S. or public sources when private investment was readily available and more efficient at creating employment. Abdullah said that as he traveled and met with outside investors, he became more aware of the advantages of private investment, which can identify and take action on opportunities more quickly than the public sector. As an example of this difference, he compared SaD to the country of Lebanon. He said that although SaD has more natural resources (oil, sulphur mines, cultivatable land, a large educated labor pool),Lebanon enjoys better economic conditions due to the dynamism of the private sector there. BAGHDAD 00003003 002 OF 002 (SBU) CENTRAL GOVERNMENT IS PRIMARY OBSTACLE TO MORE PRIVATE INVESTMENT -------------- ¶7. (C) Abdullah believes that the national Government of Iraq had been a consistent obstacle to further economic progress in SaD. Abdullah said dealings between provincial officials and outside investors are unnecessarily complicated by the current national system of centralized authority. He said that when a province deals in contract areas that also fall under the authority of a national ministry, the ministry should naturally grant its approval, as long as the published standards and laws are complied with. Instead, from Abdullah,s perspective, national ministries often fail to issue necessary approvals in a timely and responsive manner. He said that the national government needs to be pushed for change to facilitate private sector development and asked the PRT for help in this area. Specifically, Abdullah asked the PRT to seek the Embassy,s help on urging GoI to delegate authority to the Governorate to (a) assign land, for as long as the investment law allows (50 years renewable),and (b) to deal directly with the investor. This, he believes, would enable the province to move forward quickly with major foreign private-sector investments. The Deputy Governor said the relevant ministries are being obstructionist on both counts, insisting on their own prerogatives. ¶8. (C) As an example, Abdullah told the PRT that he had initiated discussions with the Noor Investment Group in Lebanon, which he said is one of the largest real-estate groups in the Middle-East. They discussed investment opportunities for Noor in SaD, and Abdullah is fearful that unless the national government devolves more authority to the provinces to negotiate directly, he will not be able to persuade investors like Noor to invest in SaD. CROCKER