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SIPDIS

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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 openin

g 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

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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