EMBASSY KUWAIT RESPONSE TO FOREIGN ASSISTANCE

C O N F I D E N T I A L SECTION 01 OF 03 KUWAIT 000734

SIPDIS

STATE FOR NEA/ARP

E.O. 12958: DECL: 06/26/2013
TAGS: EAID ECIN ECON EFIN EL AL
SUBJECT: EMBASSY KUWAIT RESPONSE TO FOREIGN ASSISTANCE
INFORMATION REQUEST

REF: A. STATE 52635

B. KUWAIT 568

C. KUWAIT 185

Classified By: Classified By: Ambassador Deborah K. Jones
for reasons 1.4 b and d


1. (C) Summary: Kuwait provides substantial foreign
assistance, primarily, but not exclusively to Islamic
countries, in line with its foreign policy priorities.
Kuwait gives an estimated USD 1 billion annually to 100-plus
countries, with significant assistance for Lebanon, the
Palestinian Territories, and Yemen. Disbursement of
substantial aid to Iraq pledged over the years remains
stymied by security concerns, Kuwait's ambivalence toward the
Maliki government and - according to the GOK - Iraq's failure
to designate specific projects, e.g. hospitals or schools.
Kuwait is open to greater global cooperation and coordination
with both the U.S. and other donors as demonstrated by its
hosting of a donor coordination conference at the Arab Fund
in February 2007. End Summary.

Generous Assistance
--------------


2. (C) This cable presents a response to Ref A request for
information on Kuwait's approach to foreign assistance and
Embassy's assessment of Kuwait's willingness to collaborate
more closely with the U.S. to advance shared long-term
priorities in countries of mutual interest. Kuwait donates
generously through both bilateral and multilateral channels
and has demonstrated openness to increasing its global
cooperation as highlighted by its hosting of the February
2007 Arab Fund Coordination Conference. Rising oil prices,
which have created a budget surplus in recent years, have
contributed to an increase in foreign assistance.


3. (U) Estimates of Kuwait's annual aid contributions are in
excess of USD 1 billion to 100-plus countries. The major
funding mechanisms are the Kuwait Fund for Arab Economic
Development, the Arab Fund for Economic and Social
Development (a pan-Arab, but Kuwait-based agency comprising
members of the Arab League and headed by a Kuwaiti official,
to which Kuwait is a major contributor),and the Kuwait Red
Crescent Society. These organizations offer various forms of
assistance throughout the Arab world, Africa, Asia, Europe,
and Latin America. As of 2007, the Kuwait Fund distributed
716 loans worth USD 13 billion globally (53% in Arab
countries, 20% in Asia and the Pacific, 10% in Western
Africa, 8% in Central, East, and Southern Africa, 6% in
Europe and Central Asia, and 3% in Latin America and the
Caribbean). Of these 716 loans, 479 go to Organization of
the Islamic Conference (OIC) countries.


4. (U) Most of the aid is provided in the form of direct
financial assistance, through loans and grants, and ranges
from emergency response to long-term infrastructure programs.
In addition to project lending operations, Kuwaiti aid also
focuses on technical assistance and capacity building.
Examples of recent pledges include more than USD 100 million
pledged for tsunami relief and USD 500 million pledged
post-Hurricane Katrina (note: The Katrina pledge consisted
largely of an offer to donate oil, which the USG was unable
to accept. The GOK's actual contribution to Katrina relief
was USD 50 million. End note.). The majority of the
long-term development projects target infrastructure (roads,
energy, agriculture, water and sanitation),education, and
public health.

A Focus on the Middle East
--------------


5. (C) Lebanon: Both the Kuwait Fund and Arab Fund provide
aid to Lebanon. During the Paris III conference in January
2007, the Arab Fund pledged USD 700 million to Lebanon. The
Kuwait Central Bank deposited emergency funds in Lebanon's
Central Bank to shore up international confidence. The GOK
also pledged USD 5 million to the Hariri Tribunal start-up
costs and may be willing to support future operating costs as
needed. The Kuwait Red Crescent provides significant
emergency relief and assistance to Lebanon, especially in the
wake of the 2006 war. Assistance focuses both on in-kind
donations, food and medical deliveries, and distribution of
money, technical assistance, and logistical support to local
Red Crescent societies.


6. (C) Palestinian Territories: Though absent from the
Annapolis Conference, the GOK pledged USD 300 million at the
December 2006 Paris Donor's Conference and remains strongly

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supportive of Palestinian Authority President Abbas and Prime
Minister Fayyad. Kuwaitis are concerned over conditions in
Gaza and openly critical of Israeli pressure on the civilian
population. The GOK has also condemned Hamas rocket attacks
against Israel. Kuwaiti charities, notably the Kuwait Red
Crescent Society and the Social Reform Society (affiliated
with the Kuwait Muslim Brotherhood),are active in Gaza.
Despite favorable noises from senior officials concerning the
OPIC loan guarantee program for West Bank housing, the GOK
has yet to allocate any of its Paris pledge for this purpose.
The Kuwait Red Crescent has also been active in the
Palestinian Territories, especially in response to the
closing off of Gaza. Assistance focuses both on in-kind
donations, food and medical deliveries, and distribution of
cash, technical assistance, and logistical support to local
Red Crescent societies.


7. (SBU) Yemen: At the November 2006 pledging conference in
London, the Arab Fund pledged 700 million Kuwaiti dinar (USD
2.45 billion) to Yemen. To date, USD 80 million has been
disbursed. Projects to expand the airport, construct a
causeway out of Aden, contribute USD 100 million in social
funds, develop public works and employment projects, enhance
agriculture in the south, modernize the network of rural
roads, and upgrade the sewage system in Aden are in the
pipeline or underway.

Aid to Iraq: A Complicated Tale
--------------


8. (C) Over the last four years, the GOK has pledged USD 900
million in aid for reconstruction/development in Iraq, but
has disbursed roughly USD 21 million to date. After years of
delay due to internal security concerns, the Kuwaitis now say
they are awaiting project/sector proposals from the Iraqi
government. They have also cited the inability to monitor
projects and concerns over Iraqi corruption as justifications
for not disbursing aid more rapidly. The GOK also continues
to delay any action on forgiveness of Saddam-era Iraqi debt
to Kuwait, citing domestic political sensitivities (Note:
although neither have they actively sought to collect on
their debt. End note.). On United Nations Compensation
Commission compensation, the GOK opposes reducing the current
five percent level until Kuwait's environmental claims are
funded (likely in 2010),and resents repeated Iraqi attempts
to persuade the UN (without any bilateral consultation with
the GOK) to reduce it to one percent. Amiri Economic Advisor
Dr. Yousef El-Ebraheem recently suggested that southern Iraq
requires its own Marshall Plan to foster economic development
and job creation, and said the 2009 Arab Economic Summit,
which Kuwait will host, would be an appropriate forum to
discuss this.


9. (C) Iraq's membership in the Arab Fund remains suspended
following unsuccessful attempts by the Government of Iraq
(GOI) and Arab Fund to reach an informal agreement in 2007 on
the repayment of some USD 110 million in arrears. The Arab
Fund professes to remain open to an easy repayment regime
provided the GOI shows good faith and at least nominally
begins paying down its arrears. The Arab Fund leadership has
indicated that hundreds of millions of dollars in
concessional loans could flow to Iraq once that occurs.
Senior U.S. officials have suggested that once the arrears
are resolved to the Fund's satisfaction, GOI and U.S. experts
can travel to Kuwait for consultations with the Fund and
other Arab donors on specific project support to Iraq. Arab
Fund Director Al-Hamad said the Fund would be happy to host
such an event, provided the U.S. clears the proposal at the
political level with key Arab donors such as Saudi Arabia and
UAE.

More Oil, More Aid?
--------------


10. (U) While it is difficult to determine causation, one
can safely assume that the rapidly increasing price of crude
oil has had an impact on the increase in foreign assistance
from Kuwait. Between 2000-2004, the Arab Fund increased its
amount of total loans on average of 2% annually. Post-2004,
the rate is on average 4.5% a year for roughly the same total
number of assistance projects. Kuwaiti donors have varied
levels of follow-up on these grants and loans, but most of
the larger donors require at least regular reporting, audits,
and also site visits.


11. (U) In addition to its bilateral aid, Kuwait provides
assistance multilaterally, specifically through the
International Monetary Fund debt relief initiative for
Heavily Indebted Poor Countries. In 2006, Kuwait provided

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debt relief to 15 countries worth an estimated USD 376
million. The Government of Kuwait has also offered oil and
its derivatives as assistance to Jordan for a three-year
period ending in 2010.


12. (U) In addition, Kuwait provides financial assistance
through its sovereign wealth fund, the Kuwait Investment
Authority (KIA). KIA contributes heavily to financing and
development of social services in the developing world.
These projects are largely done in coordination with the
World Bank, International Monetary Fund, and the United
Nations. To coordinate bilateral assistance, Kuwait attends
semi-annual meetings with the Abu Dhabi Development Fund,
Saudi Development Fund, and the Islamic Development Bank
among others to identify priority areas and avoid significant
overlap. The Kuwait Red Crescent Society coordinates with the
International Federation of the Red Cross, the United
Nations, and on a bilateral basis with the Red Cross/Red
Crescent in the recipient country.

GOK Commitment to Donor Coordination
--------------


13. (SBU) On February 4, 2007, the Arab Fund hosted a unique
international donor coordination event to promote dialogue
and increase cooperation between leading Arab and
international donors. Nine Arab organizations that comprise
the Arab Fund's joint secretariat (and which together
represent more than USD 80 billion in annual expenditures)
attended, along with twenty international organizations,
including USAID, the World Bank, Japanese, Canadian, and
European development agencies among others (See Ref C).
Currently, there is no official declaration of Kuwait's
interest in securing closer cooperation with the Organization
for Economic Cooperation and Development's Development
Assistance Committee. However, the GOK has made it clear
that it is interested in bolstering its engagement with
international donors, including the U.S., by increasing its
attendance at international donor meetings and building on
discussions from the February 2007 event.

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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/
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JONES