KIA CALLS ON UNCTAD TO CORRECT ITS ASSESSMENT OF

UNCLAS KUWAIT 000952 SENSITIVE SIPDIS DEPARTMENT FOR NEA/ARP, EEB/IFD/OMA STATE PASS FEDERAL RESERVE TREASURY FOR INTERNATIONAL AFFAIRS AND OCC E.O. 12958: N/A TAGS: EFIN EINV ECON KU SUBJECT: KIA CALLS ON UNCTAD TO CORRECT ITS ASSESSMENT OF LOSSES REF: KUWAIT 132 ¶1. (SBU) Kuwait's press played up details in UNCTAD's 2009 World Investment Report claiming that the Kuwait Investment Authority (KIA) lost $94 billion in 2008 and that the GoK injected $59 billion over the year for net losses of $35 billion. This drew an almost immediate KIA response, which denied the figure and called on UNCTAD to correct its figures. In February 2009, KIA told a closed door Parliamentary committee that net losses were $31 billion (reftel). ¶2. (SBU) The normally reticent KIA quickly reacted to local press reports of the losses. UNCTAD had cited a January 2009 Council on Foreign Relations report for its data (and had transposed the numbers for Kuwait and Qatar). According to a senior KIA official, the numbers and the methodology of the report were "significantly, not slightly" wrong. He explained that KIA had chosen not to respond to the CFR report as "they are a private organization and can say what they want." Given "the credibility of UNCTAD," KIA had to respond, he said. In an aside, he noted that KIA -- along with other investors -- was meeting with Russian President Putin, about investment opportunities. ¶3. (SBU) Comment: Although the net number is close to what KIA reported to parliament, the gross loss is considerably higher than KIA officials have indicated to us. Based on Kuwait's FY 2008/2009 budget results, we believe the $59 billion injection is also significantly exaggerated. By law, Kuwait puts 10 percent of revenues into its Fund for Future Generations, or 2.1 billion KD ($7.3 billion) for the fiscal year ending in April 2009. Kuwait's fiscal surplus (managed by KIA) was approximately $2.2 billion for the fiscal year. Even if we combine the surpluses and mandatory contributions for two fiscal years (2007/2008 had a massive budget surplus of around $26 billion),the most the Kuwaiti budget could have injected into KIA managed funds would have been no more than $42 billion. This, however, is making some heroic assumptions. ¶4. (SBU) Comment Continued: Kuwaiti politics, as much as a concern for accuracy, probably played a role in KIA's decision to publicly comment. KIA does not publicly discuss the size of its holdings, though it does brief both parliament and the cabinet. Kuwaiti parliamentarians have sharply questioned KIA about possible losses during the global financial crisis, and KIA officials note that their time is taken up responding to parliamentary inquiries. KIA's investments are both the country's post-oil retirement fund and the budget stabilization fund. As such their reported gains and losses are the subject of intense political interest. Although the numbers involved appear large for a country with a citizen population of only 1.1 million, current estimates of KIA,s holdings amount to slightly more than 200k USD per citizen ) not an enormous amount to bankroll a nation to prepare to meet an eventual future without oil. End Comment. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* JONES