DEPUTY SECRETARY NEGROPONTE'S MEETING WITH THE AMERICAN

UNCLAS SECTION 01 OF 02 ISLAMABAD 001536

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON PGOV PREL PK
SUBJECT: DEPUTY SECRETARY NEGROPONTE'S MEETING WITH THE AMERICAN
BUSINESS COUNCIL



1. (SBU) SUMMARY: Deputy Secretary Negroponte and
Assistant Secretary Boucher met with the elected Executive Board of
the American Business Council (ABC) in Karachi on March 27.
Representatives from U.S. companies were optimistic about Pakistan's
investment climate but expressed concerns over the impact of the
energy crisis on the manufacturing sectors, the need for consistency
in economic policies with the newly installed federal government,
the lack of qualified or skilled workers graduating from the
Pakistani educational system, the lack of patent protection afforded
pharmaceutical products, and the overall law and order situation
impacting the "already negative" international perceptions of
Pakistan. END SUMMARY.


2. (SBU) Deputy Secretary Negroponte and Assistant Secretary Boucher
met with the elected Executive Board of the American Business
Council (ABC) in Karachi on March 27. Representatives from
Colgate-Palmolive, Lakson Tobacco, JP Morgan, Dell, ACE Insurance,
Abbott Laboratories, Wyeth Laboratories, Gillette, Gerry's
International, Pfizer, and IBM attended.


3. (SBU) The free flowing discussion covered a range of issues of
critical importance to American investors in Pakistan. Noting that
on average thirty-seven percent of all foreign direct investment
into Pakistan over the last 17 years has been from the United
States, ABC members expressed continued optimism overall about the
investment climate. ABC members noted that, despite the political
problems and the riots after the Bhutto assassination, 2007 was the
most profitable year for American companies in Pakistan. The ABC
cited examples of planned expansions such as IBM which is doubling
activities in Pakistan, Procter and Gamble which is bullish with
plans to set up two new plants to supply the domestic market and
their own power plant, and Abbott Laboratories which has its second
largest plant in the world outside of Karachi.


4. (SBU) The ABC noted that the economic policies of the Musharraf
regime had been very successful and the new government would need to
continue with these reforms. They expressed hope that there would
be consistency of economic policies without the "yo-yoing of the
past." The ABC also explained that Pakistan needs to move forward
with second generation economic reforms such as reducing the
dependency on subsidies for fuel and food, expanding the tax base,
restarting privatization efforts, and continuing to increase the
overall transparency. While noting that the overall law and order
situation obviously impacts any plans for expansion, the ABC stated
that the continued negative media coverage which increases the
"already negative international perceptions of Pakistan" is a bigger
threat to their business.

--------------
Energy
--------------


5. (SBU) Noting that there had been an eight hour blackout the
previous night, the ABC reps collectively stated that "dealing with
the energy problems needs to be the number one priority of the new
government." In response to the Deputy Secretary's question about
how the energy crisis is affecting manufacturing, ABC members noted
that most large scale manufacturing plants in Pakistan have their
own power generation source, but the bulk of industry relies upon a
combination of state supplied power and self generation. Typically
this self-generated power was used solely as back-up power but due
to the rising diesel prices and the excessively long blackouts, the
basic supplies of raw materials and manufactured inputs have been
impacted. Local producers simply cannot meet orders and provide the
needed quantities, resulting in increased imports for ABC members to
ensure that stocks are on hand to meet basic supplies of essential
inputs.

--------------
Intellectual Property Rights (IPR)
--------------


6. (SBU) Turning to IPR, the group noted the inability of the
government to pass data protection legislation for pharmaceutical
patent protection. Expressing frustration at both the length of
time and the cumbersome process, the ABC asked that we "not let
Pakistan off the hook in the 301 process." Representatives noted
that Pakistan is not meeting its minimum obligations under Treaty
Related Intellectual Property in Services (TRIPS) and that local
companies are bringing in the generic versions of most drugs before
a company can apply for a legitimate patent.

ISLAMABAD 00001536 002 OF 002



--------------
Education
--------------


7. (SBU) In response to the Deputy Secretary's question about how
the U.S. could best help Pakistan, the ABC ranked education second
after energy, in terms of the most needed policy changes. All ABC
members noted that they were unable to find qualified employees,
despite the high unemployment rate in Pakistan. They cited the lack
of qualified or skilled workers graduating from the Pakistani
educational system and expressed hope that the U.S. could assist in
improving the skilled workforce.

--------------
Continued Engagement
--------------


8. (SBU) ABC members also raised restarting negotiations for the
Bilateral Investment Treaty and implementation of the Reconstruction
Opportunity Zones as critical to expanding the bilateral
relationship. They noted that the U.S. will have a key role to play
in the economic policies because neither the Pakistan Muslim
League-Nawaz (PML-N) nor the Pakistan People's Party(PPP) has
developed a detailed economic policy and "have been out of the
country for too long to know what the actual economic polices are in
practice." The Deputy Secretary noted that the U.S. shares with the
ABC a "common interest in seeing stability and prosperity in
Pakistan which will further economic development."


9. (SBU) Pakistani representatives of American business interests
who attended the meeting were: Mr. Tasleemuddin Ahmed
Batlay,Director of Colgate-Palmolive; Mr. Arshad Rahim Khan,
Managing Director and Chief Executive of Wyeth (pharmaceuticals);
Mr. Humayun Bashir, Country General Manager of IBM; Mr. Asif Jooma,
Managing Director of Abbott Laboratories; Mr. Saad Amanullah Khan,
Chief Executive Officer of Gillette; Ms. Zehra Naqvi, Chief
Executive of ACE Insurance; Mr. Akram Wali Mohammad, Managing
Director of Gerry's International (air cargo and ground-handling
services company) ; and Mr. Reza-ur-Rahim, Senior Country Officer
and Head of Investment Banking in Pakistan for JP Morgan.


10. (U) This cable has been cleared with the Deputy Secretary's
staff.

PATTERSON