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