DEPUTY SECRETARY KIMMITT'S MEETINGS WITH

UNCLAS SECTION 01 OF 02 JERUSALEM 000916 SENSITIVE SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR GOLDBERGER/SHAMPAINE/SACHAR; R FOR MCDANIELS NSC FOR ABRAMS/PASCUAL; TREASURY FOR MATHIASEN/ROSE; DEPT PLEASE PASS TO USAID FOR ANE/MEA:MCCLOUD/BORODIN E.O. 12958: N/A TAGS: EINV EAID ECON KWBG KPAL IS OVIP KIMMITT ROBERT) SUBJECT: DEPUTY SECRETARY KIMMITT'S MEETINGS WITH PALESTINIAN PRESIDENT ABBAS AND PM FAYYAD ¶1. (SBU) Summary. Treasury Deputy Secretary Kimmitt led a Presidential Delegation to the Palestine Investment Conference in Bethlehem on May 21-23. The delegation met with Palestinian Authority (PA) President Mahmoud Abbas on May 21 and Prime Minister Salam Fayyad on May 22. Deputy Secretary Kimmitt expressed to each the USG's strong support for the conference's goals of increasing economic activity and investment in the West Bank. He reinforced that the USG would continue to provide significant financial assistance to the PA and to support development of the Palestinian private sector. President Abbas told the delegation that the success of the conference needs to be followed up with investments in tourism and housing as two critical areas for the Palestinian economy. Prime Minister Fayyad emphasized that the PA continued to survive "hand to mouth" on financial contributions from the international community. The Deputy Secretary noted that rigorous implementation of anti-money laundering legislation would give the PA a comparative advantage over other developing economies in the region in attracting foreign investment. End Summary. ¶2. (U) Treasury Deputy Secretary Robert Kimmitt led a Presidential Delegation to the Palestine Investment Conference (PIC) in Bethlehem on May 21-23. Also on the delegation was Commerce Deputy Secretary John Sullivan, OPIC CEO Rob Mosbacher, U.S. Trade and Development Agency Director Larry Walther, Aspen Institute Chairman Walter Isaacson, and Ziad Asali, the President of the American Task Force for Palestine. Isaacson and Asali are also members of Secretary Rice's U.S-Palestinian Public-Private Partnership. Abu Mazen: Focus on Tourism and Housing -------------- ¶3. (SBU) The delegation, accompanied by Consul General Walles, met with President Abbas (Abu Mazen) on May 21 at the Bethlehem Muqata, following the PIC's opening plenary session. D/S Kimmitt said the conference was clearly off to a successful start, with such large attendance at the opening session. He said the PA needs to follow-up on the conference in a way that delivers economic progress for Palestinians. He suggested the PA create an annual investment event. Abu Mazen responded that he was pleased by the attendance of the UAE and Saudi representatives, though he had hoped for broader attendance from the Arab world. He noted that many stayed away "for political reasons" and due to the lack of relationships with the GOI. Abu Mazen noted that the UAE delegation arrived by helicopter so as not to deal with Israeli border officials. ¶4. (SBU) In response to D/S Kimmitt's question about potential sectors on which to focus, Abu Mazen said that housing and tourism have the potential to drive real economic growth in the West Bank and Gaza. He noted the acute shortage of housing and the USD 300 million deal signed between a Palestinian developer and a Qatari company to build a new residential community north of Ramallah. On tourism, Abu Mazen said that the atmosphere, particularly in Bethlehem, is changing, with many of the armed factions "having disappeared" as a result of PA security efforts. Aspen Chairman Isaacson said that the U.S.-Palestinian Partnership would look to support efforts in the tourism sector, including by bringing a delegation of senior travel and hotel executives to the West Bank later in the year. Asali stressed that the U.S. private sector is motivated to support economic development in West Bank. ¶5. (SBU) TDA Director Walther noted that his agency would sign a grant agreement worth nearly USD 500 thousand with a Palestinian technology firm to promote the deployment of WiMax technology in West Bank cities and increase Palestinian access to the Internet. D/S Kimmitt noted that, as in the former East Germany after the end of the Cold War, the PA had the opportunity to "skip a generation" of technology and establish the West Bank as a leading regional center for communication and information technology development. OPIC President Mosbacher noted that he would be signing two deals while at the PIC, including a mechanism to provide political risk insurance to Palestinian businesses. ¶6. (SBU) D/S Kimmitt said that the USG would continue to encourage donors to live up to their financial pledges to the PA. He stressed that it is critical for the PA to continue JERUSALEM 00000916 002 OF 002 to make the necessary, but tough, decisions to improve the business climate and to attract investment. It is important for the PA to ensure strict enforcement of anti-money laundering (AML) laws that are on the books. In the current international financial environment, investors are increasingly looking at AML practices in order to ensure the security of their investments, he said. Action on this front would give the PA an advantage in the competition for inbound investment dollars within the region. In closing, both sides agreed to review the PIC's conclusions and develop a workplan to move the U.S.-Palestinian economic relationship forward. Fayyad: Conference a Success, but Fiscal Problems Remain -------------- -------------- ¶7. (SBU) The delegation met with Prime Minister Fayyad on May 22 at the Bethlehem Conference Center. Fayyad expressed his strong satisfaction with the progress of the conference, and said that he was focused on transforming the momentum into specific deliverables and new business opportunities. However, the daily functioning of the PA remained at risk due to the continuing fiscal crisis. "We are living from hand to mouth," he said. D/S Kimmitt said that the USG would continue to encourage others to meet the commitments they have made to the Palestinians, and that the USG intends to do the same. Fayyad expressed his deep appreciation for the U.S. contribution of USD 150 million for budget support in ¶2008. "You have come through where others have not." ¶8. (SBU) Walther noted TDA's support for WiMax development and added that he had met with representatives from the Palestinian stone industry. Fayyad called U.S. support for the stone trades an "excellent idea", noting that the stone industry is the PA's largest source of export revenue. ¶9. (SBU) Isaacson and Asali stressed the importance of the tourism industry and said they would marshal U.S. private sector support for Palestinian efforts to bolster the Palestinian tourism sector. Fayyad said that the tourism sector had picked up in Jerusalem and the West Bank, and he hoped to double the size of the Palestinian tourism market in the next few years. He also suggested that the U.S. private sector might be able to help is with greenhouse technology and in the production of herbs and other high-value cash crops for export to Europe. ¶10. (U) Deputy Secretary Kimmitt has cleared this message. WALLES