GOP NOT YET FOCUSED ON BIT NEGOTIATIONS BUT INTERESTED IN

UNCLAS SECTION 01 OF 02 ISLAMABAD 001601 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: EINV EFIN ENGY ECON PGOV PREL PK SUBJECT: GOP NOT YET FOCUSED ON BIT NEGOTIATIONS BUT INTERESTED IN ENERGY INVESTMENT CONFERENCE Ref: Islamabad Summary -------------- ¶1. (U) This is an action request. Please see para five. ¶2. (SBU) Summary: Econoffs met with Board of Investment (BOI) Executive Director General Major (Rtrd) Iqbal Ahmad and BOI staff April 17 to discuss resumption of BIT negotiations and organization of a Pakistan energy investment conference in the U.S. Ahmad stated that the new GOP is "on a war footing" regarding the energy and wheat shortages, and has not yet had time to read in on the BIT file. The BOI has already begun to discuss organizing an energy investment conference in July or August in Houston, and asked for USG assistance. The Siemens-Westinghouse dispute settlement case was also discussed. End summary. ¶3. (SBU) Economic and Commercial Affairs Counselor, Deputy Economic and Commercial Affairs Counselor, and Economic Specialist met with Board of Investment (BOI) Executive Director General Major (Rtrd) Iqbal Ahmad (BOI's current number two) and BOI staff April 17 to discuss resumption of BIT negotiations and organization of a Pakistan energy investment conference in the U.S. Bilateral Investment Treaty -------------- ¶4. (SBU) On the Bilateral Investment Treaty (BIT),Ahmad said that the new GOP is not yet ready to address resumption of negotiations. Having only been in office for three weeks, the energy and wheat crises are occupying most of the new government's attention, and the relevant ministries have not yet had a chance to review the files. We gave BOI a copy of the November 22, 2006 letter to Pakistan's then Attorney General Makhdoom Ali Khan. ¶5. (SBU) BOI's legal advisor, Shamila Mahmood, commented that the U.S. still owes the summary ("minutes") of the last negotiating session in 2006. BOI will remain the lead on the BIT, which the Ambassador raised in her April 11 meeting with Finance Minister Dar (reftel). We also raised the BIT in briefings with the Pakistan's Ambassador-designate to the U.S. Husain Haqqani April 15, and People's Party of Pakistan (PPP) Co-Chairman Asif Zadari April 16. Action request: Embassy requests a copy of the record of the 2006 negotiating session to give to the GOP. Post believes that this session was done via teleconference. End action request. ¶6. (SBU) Ahmad and Mahmood noted that several of the Ministries have asked BOI about the possibility of negotiating a Free Trade Agreement (FTA) with the U.S. They explained that the new Ministers were getting briefed on the issues and they have conveyed the details from the bilateral exchange of letters between Presidents Bush and Musharraf. Econ Counselor explained that the BIT is the best vehicle for cooperation and investment promotion and protection at this time, given the expiration of Trade Promotion Authority legislation in 2007. BOI staff did understand that a BIT is very similar to the FTA investment chapter. Reconstruction Opportunity Zones -------------- ¶7. (SBU) Ahmad asked about progress on Reconstruction Opportunity Zones (ROZs). Deputy Econ Counselor briefed on the introduction of the legislation in the Senate, and expressed our hope that this legislation would be passed quickly so that we can move onto implementation. BOI will take an active role once investors are in place. Energy Conference -------------- ¶8. (SBU) The GOP has wanted to sponsor an energy conference since last year but the timing has been problematic until now. BOI will be the lead GOP agency, and it has identified a July/August timeframe in Houston. They will reach out to the Pakistani Embassy in Washington, Consulate in Houston, and U.S. energy companies already active in Pakistan. At the suggestion of the Canadian ISLAMABAD 00001601 002 OF 002 government, they will do a similar conference in Calgary. Econoffs emphasized that it will be important to set a date quickly, and that the GOP should contact Representative Shelia Jackson Lee and Senator Kay Bailey Hutchison since they both represent the Houston area and have traveled to Pakistan recently. ¶9. (SBU) Econoffs also raised the difficulties in setting utility tariffs in Pakistan and suggested that the energy Conference delegation also included representatives of the tariff regulatory body. The BOI noted that the Finance Minister has raised the tariff issue as unnecessarily cumbersome in attracting foreign investment into the energy sector. Ahmad acknowledged the tariff difficulties, and noted that the Finance Minister wants to create a "one stop window" within the BOI that would facilitate this process for foreign investors. We also raised the issue of non-payment of the differential between international and domestic prices for U.S. energy companies in Pakistan. BOI recognizes the problem and its potential effect on new U.S. energy investment here. Siemens-Westinghouse investment dispute -------------- ¶10. (SBU) In support of why a BIT is necessary for foreign investors, Econoffs raised the long-standing Siemens-Westinghouse investment dispute, which has been mired in Lahore courts for about five years. BOI Legal Advisor said that she would take a look at the case, and recommended that both sides push for resolution with the parties to end this long-standing dispute. Ahmed noted that the Finance Minister had recently asked about the details of this case as well. We will continue to follow up. Comment -------------- ¶11. (SBU) Comment: We will continue to raise resumption of BIT negotiations and the advantages of concluding a BIT with appropriate GOP officials, but recognize that resolution of the energy and food shortages and the fiscal deficit are the principal preoccupations for the new GOP. We will be approaching Washington agencies for assistance with the GOP plans for an energy investment conference as they evolve. End comment. PATTERSON