BOSNIA: GENERAL ELECTRIC BALKS AT DODIK'S

C O N F I D E N T I A L SARAJEVO 001600 SIPDIS STATE FOR EUR/SCE HYLAND, FOOKS, STINCHCOMB E.O. 12958: DECL: 10/14/2023 TAGS: ECON EINV PINR PREL BK SUBJECT: BOSNIA: GENERAL ELECTRIC BALKS AT DODIK'S INVESTMENT CLAIM REF: SARAJEVO 1193 Classified By: Classified by Michael Murphy for reasons 1.4 (b) and (d) . ¶1. (C) Summary: Republika Srpska (RS) Prime Minister Dodik announced to the press on October 3 that General Electric will invest 400 million Euros into the healthcare and energy sectors in the RS. The announcement took GE representatives by surprise, who confirmed that they will sign a non-binding Memorandum of Understanding with Dodik on October 23, but do not intend to confirm investment in any sector. They are particularly concerned that this announcement will damage any possibilities GE has of winning tenders in the Federation. Considering that foreign direct investment for the first eight months of 2008 was only 30 million Euros in the RS, it is likely that Dodik was merely looking for an opportunity to present a foreign investment success story before the October 5 municipal elections. End Summary. ¶2. (SBU) On October 3, Reuters published an article announcing that General Electric (GE) will sign an investment deal in the Republika Srpska (RS) worth at least 400 million Euros. Reuters received the information directly from RS Prime Minister Dodik in an interview. He further elaborated that 300 million Euros will be spent in the energy sector with 100 million Euros invested in the healthcare sector. He later reiterated this information to the Embassy,s Banja Luka branch chief, highlighting GE,s additional interest in railway infrastructure. Over the last year, there have been many press statements regarding GE investment in the Republika Srpska, although we have seen no actual investment in any sector. ¶3. (C) According to GE International Marketing and Business Development Director Gaetano Massara, GE has made no formal commitment to invest in any sector in the RS. GE plans to sign a Memorandum of Understanding with the RS Government on October 23, which would be a non-binding agreement formalizing, in Massara,s words, "the wish of GE and the RS to cooperate for the modernization of RS infrastructure in the transportation, healthcare, energy and aviation sectors." Massara was surprised and concerned when he learned about the Reuters article. He was particularly concerned about GE,s reputation in the RS, since the investment figures were totally false. Massara also voiced concern about GE,s ability to work in the Federation in light of the large investment claim by Dodik. GE is currently considering a public rebuttal to Dodik,s press statement, which would clarify GE,s basic intent without damaging future relations with the RS Government. At the very least, they confirmed to us that they will personally draft the press statement following the MOU signing on October 23. COMMENT -------------- ¶4. (C) Total foreign investment in the RS for the first eight months of 2008 was only 30 million Euros, a mere fraction of Dodik,s claimed GE investment of 400 million Euros. As news reports increasingly lament the drop in foreign investment since 2007, when the sale of RS Telekom brought the investment level in the RS to a high of 932 million Euros, it is likely that Dodik was looking for ways to portray a more attractive investment picture, particularly right before the Oct. 5 municipal elections. Dodik has a track record of announcing large investment projects that are not quite what he claims or that do not produce the promised returns (reftel). ENGLISH