ARAB FUND AND KUWAIT FUND RECIPROCATE USAID

UNCLAS SECTION 01 OF 02 KUWAIT 001190 SIPDIS NEA/ARP SAWYER E.O. 12958: N/A TAGS: EAID PREL KU SUBJECT: ARAB FUND AND KUWAIT FUND RECIPROCATE USAID INTEREST IN COLLABORATION ¶1. (SBU) Summary. the Directors General of two of the major development funds in the Middle East, the Kuwait Fund for Arab Economic Development(KFAED) and the Arab Fund for Economic and Social Development(AFESD),met separately with U.S. Agency for International Development Administrator and U.S. Department of State Director of Foreign Assistance Henrietta Fore on December 2 and expressed interest in coordination and cooperation on future development projects both inside and outside the Middle East. The two directors also discussed ongoing projects in a number of countries in the context of identifying the character that such cooperation might take. End summary. Kuwait Fund -------------- ¶2. (SBU) Director General of the Kuwait Fund Abdul Wahab Al-Bader opened the December 2 meeting with Administrator Fore by noting that U.S. AID and the Kuwait Fund had mutual interests in many countries and expressing a wish to discuss common interests and the possibility of cooperation. In response to Ms. Fore's inquiry as to how AID might best cooperate on projects with the Kuwait Fund, Bader said the Kuwait Fund prefers funding infrastructure projects but also supports social, health and education projects in some countries. Ms. Fore said that following the Monterey Consensus, AID tries to work with recipient countries' priorities and focuses its efforts on people-oriented programs such as skills building through training and exchange programs. Ms. Fore noted that the Kuwait Fund focus on infrastructure and AID's focus on skills building might provide opportunities for cooperation. Bader discussed Fund activities in several countries of mutual interest and three items were identified for follow-up. ¶3. (SBU) Bader said the Kuwait Fund was interested in funding projects in Afghanistan but was barred by its charter from doing so because Afghanistan was in arrears on a project from many years earlier. He said Kuwait Fund efforts to fund a project four years ago failed because the GOA refused to sign an agreement stating that some of the funding would be used to repay part of the arrearages. Bader said the GOA refused despite assurances from the Fund that it would not insist on actual payment; that it simply needed the signed commitment to satisfy internal institutional demands. He said he had sought, unsuccessfully, to finalize the agreement with PM Karzai, as well as with the Afghan Minister of Finance. Ms. Fore recommended Bader try to work with Afghan Foreign Minister Rangin Dadfar Spanta who she characterized as an Afghan official who "made decisions." ¶4. (SBU) Bader said the Kuwait Fund had been very involved in education projects in Yemen from the 60's to the 80's but had stopped activities since 1990. He said currently the highest priority for Yemen was social projects. He said the Fund was taking a long view of Yemen's employment problems and had approved a project for the construction of a college. Ms. Fore said that technical assistance was available for capacity building in universities and ASKED that Bader inform AID if he "saw and openings for us." ¶5. (SBU) Bader said the Kuwait Fund had administered 50 projects worth $185 million in Lebanon including a partially completed highway project in Lebanon and a project for replacing destroyed houses which had funded replacement of 10,000 houses. Bader and Fore agreed to put their respective Mission Directors in Lebanon in contact with each other to discuss possible areas of coordination and cooperation. ¶6. (SBU) Bader said the Kuwait Fund could do 1-2 projects per year in Pakistan but its activities had been severely hampered by the many changes in government and further compromised by heightened concerns arising out of the attacks in Mumbai, which caused the Fund to delay a planned agreement in December. He said health, education and social projects in Pakistan were of interest to the Fund but that the GOP had set a hydro-electric project as its priority. Ms. Fore said that AID had many health and education projects in Pakistan and that it worked with the Aga Khan Foundation. Arab Fund -------------- ¶7. (SBU) Arab Fund Chairman and Director General Abdul Latif Yousef Al-Hamad noted in opening comments to Ms. Fore during their December 2 meeting that the Arab Fund had current funding of 683 million Kuwaiti Dinars(KD) ($2.5 billion) and KUWAIT 00001190 002 OF 002 had administered a total of KD6.5 billion ($24 billion) worth of projects during its history. He said that the Arab Fund used concessionary loans as its primary method of funding projects and highlighted its commitment to strict adherence to repayment obligations by recipients. In response to Ms. Fore's question about the Fund's comparative advantages, Hamad said its strengths were its speed of action, knowledge of the region and its ability to speak bluntly to recipients when necessary. He noted that the Fund's project priorities focused on infrastructure with its portfolio allocated as follows: 40% on energy, 30% on roads, 20% on water projects and 10% on health, rural development and social projects. ¶8. (SBU) In discussing how AID and the Arab Fund might work together on development projects, he observed that the Fund had collaborated with the World Bank, the African Development Bank, the Islamic Development Bank and the European Development Bank. He added that they had worked with AID in the 70's and that it was a relationship worth renewing. With regard to how coordination could be fostered and what form the cooperation might take, Hamad said that contacts between the two agencies should be maintained and that he would love to collaborate "in the gaps" between what the Fund did and what AID did. ¶9. (SBU) Hamad said the Arab Fund always voted 10% of its annual net income to go to NGOs in Gaza and the West Bank. He said that the Fund had avoided dealings with the governments of Yassir ARAFAT but that now it had to deal with the Palestinian government. He said it was particularly difficult to work in Gaza and that great care had to be taken with the distribution of funding. He said the Fund was now working effectively in the West Bank and described a project that had paid the tuition of 100,000 college students in the West Bank during a period of extreme economic hardship. Hamad said the problem with Palestine was that the Fund couldn't give more loans and must do grants. He stressed that they did not do budget support. Ms. Fore said that AID was focusing on starting public-private partnerships in the West Bank aimed at increasing funding and development of businesses. ¶10. (SBU) Hamad gave a brief review of the Arab Fund's current projects by responding to Ms. Fore's question about Fund activities in Darfur. He said that two years ago $10 million had been committed toward the construction of wells. Re: Lebanon, Ms. Fore asked about Fund interest in U.S.-Kuwait collaboration. Hamad responded "absolutely," citing current water and electricity generation projects. Ms. Fore said that, in Yemen, the U.S. would like to focus on education projects. Mr. Hamad recommended that AID work with the Yemen Social Fund, which he described as the best run in the region, and the Fund for Social Works. He said a main constraint for the Fund's activities in Yemen was it did only a limited amount of grant funding. He said that the electricity grid in Yemen covers only 30% of the population and that if the U.S. could provide grants, the Fund might be able to co-finance a project to expand the electricity grid. ¶11. (SBU) Concerning project assistance to Iraq, Hamad said that Iraq is technically a non-functioning member because it has been in default since 1990 over approximately USD 50 million owed to the fund, and that it does not participate in meetings or activities. He said though the amount owed is relatively small, the principle of all members adhering to the Arab Fund's standards is important. ¶12. (U) This cable was cleared by U.S. AID Administrator Henrietta Fore. ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * MISENHEIMER