JEDDAH CHAMBER OF COMMERCE AND INDUSTRY HOSTS

UNCLAS SECTION 01 OF 02 RIYADH 000987 SIPDIS TREASURY FOR DAVID COHEN AND ANDREW BAUKOL TREASURY ALSO FOR SARA AVIEL E.O. 12958: N/A TAGS: ECON EFIN EINV PREL KTFN KWBG SA SUBJECT: JEDDAH CHAMBER OF COMMERCE AND INDUSTRY HOSTS EVENTS FOR TREASURY SECRETARY GEITHNER ¶1. (U) Summary: In his July 14 visit to Saudi Arabia, Treasury Secretary Timothy Geithner led a roundtable discussion and delivered a speech at the Jeddah Chamber of Commerce and Industry (JCCI). He discussed the economic downturn and measures taken to stem the crisis, sharing his outlook for the global economy and long-term U.S. reforms. Secretary Geithner was accompanied by Charge d'Affaires Ambassador Richard Erdman, Consul General Martin Quinn, Assistant Secretary for Terrorist Financing and Financial Crimes David Cohen, Acting Assistant Secretary for International Affairs Andrew Baukol, Deputy Assistant Secretary Andrew Williams, Deputy Treasury Attache Amanda Edwards, and Special Assistant to the Secretary Sara Aviel. End summary. BUSINESS LEADERS ROUNDTABLE -------------- ¶2. (U) JCCI Chairman Muhammad Al Fadl hosted Secretary Geithner at a roundtable with seven Saudi business leaders (Abdulaziz Othman bin Sager, Lubna Olayan, Ahmed Mohamed Ali Al Madani, Khaled bin Abdullah Al Molhem, Mohamed Abdullah Sharbatly, Hamad Al Sulaiman, and Nahid Taher). Secretary Geithner emphasized points he would later discuss in his speech, to include expectations for growth in the second half of 2009, the strength of the dollar, and support for sustained fiscal stimulus and long-term fiscal and financial sector reform. Geithner also highlighted the unknowns in the health of Eastern European economies, the possibility of commodity price increases, and the danger of governments "putting on the brakes too quickly." Chairman Al Fadl moderated the conversation with the roundtable attendees. ¶3. (U) Nahid Taher underscored participants' fears over the large size of the U.S. fiscal stimulus package, protectionism, and inflation, given Saudi Arabia's large holdings of dollar assets. Geithner assured participants that the U.S. is dedicated to contracting expansionary policies at the appropriate time and emphasized the USG's commitment to open investment. ¶4. (U) Khaled Al Molhem shared his insights on the Saudi economy -- emphasizing that the banking sector was still strong, but that there has been a mismatching of short-term deposits and long-term lending. He was also confident that Saudi investors were investing "everywhere," but that there would be an adjustment period during the downturn. Al Molhem and Geither agreed that student exchange programs are vital to helping the long-term U.S.-Saudi relationship. ¶5. (U) Lubna Olayan asked about the global recovery, inquiring if it would slow as a result of decreased U.S. consumer spending. Olayan questioned who would lead the global economy in consumer spending during this time of crisis. The Secretary maintained that the U.S. consumer would not lead the world out of recession, as it had in the past. But, he emphasized that long-term growth in the U.S. would benefit from positive household savings. Olayan was also curious about the future of U.S. sanctions -- such as those designed to address Iran, Sudan, and terrorist financing -- and stressed her concern over their impact on the international financial system. She felt that the USG held a lot of power in this regard and expressed that other countries may hold the view that the "U.S. is flexing its muscle too much." Secretary affirmed that these programs were designed to protect the financial system from abuse and underscored the need to address illicit finance at a multilateral level. REMARKS TO THE GULF REGION: REFORM AND COOPERATION NECESSARY FOR A STRONGER FUTURE -------------- ¶6. (U) In public remarks delivered at the JCCI to approximately 100 businessmen and women, academics, and members of the media, the Secretary discussed the global economic downturn, underscored the importance of policies in the U.S. and Gulf region that have been helpful in pulling the global financial system from the edge of failure, and described a four-part strategy to assist with the global economic recovery. JCCI Chairman Al Fadl moderated questions from the audience on issues ranging from reform to development assistance. ¶7. (U) RECOVERY: On the global recovery, one attendee shared his experience with the downturn in the shipping industry and asked the Secretary if he was optimistic about our ability to RIYADH 00000987 002 OF 002 face the current challenges facing global trade. Noting that trade and credit dried up during the crisis, Geithner highlighted some positive signs emerging in the broader financial markets and observed that countries most reliant on trade suffered the most as demand fell during the crisis. ¶8. (U) REFORM: Another participant raised concerns about the long-term structural challenges facing the U.S. moving forward, including the aging of U.S. baby boomers and USG obligations to provide Social Security and Medicare benefits. The Secretary discussed long-term health care reform as the greatest challenge amongst these obligations. Geithner was also asked about reform at the IMF and in the international financial system. Geithner said reforms were necessary for the financial system and international financial institutions, and expressed the need for structural changes in international bodies, such as the IMF, to give a larger voice to underrepresented economies. ¶9. (U) DEVELOPMENT ASSISTANCE: During the question-and-answer period, Geithner was also asked whether food security in Asia and Africa was a U.S. priority. Geithner stressed the need for partnership based on mutual respect and interest, calling on countries around the world to commit to this important task. The principal means of decreasing poverty in the underdeveloped world is to increase agricultural development, and he noted "that's the commitment." ¶10. (U) ILLICIT FINANCE: Money laundering, terrorist financing, and proliferation policies were also raised by the attendees. In particular, one participant asked whether the recent news about one Saudi company's possible involvement in money-laundering would be raised during the visit. (Note: This is a reference to the Saad Group. End note.) Geithner made clear the importance of implementing effective regulations to combat money laundering at the national and international levels. ¶11. (U) This message was cleared by Secretary Geithner's staff. RUNDELL