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