KUWAITI CHAMBER OF COMMERCE CHAIRMAN ON

UNCLAS KUWAIT 000150 SENSITIVE SIPDIS STATE FOR NEA/ARP, EEB/CBA COMMERCE FOR ADVOCACY CENTER AND ITA - REICHELT E.O. 12958: N/A TAGS: ETRD EINV ENRG ECON EPET KU SUBJECT: KUWAITI CHAMBER OF COMMERCE CHAIRMAN ON OPPORTUNITIES FOR U.S. BUSINESSES ¶1. (SBU) In the context of the Kuwaiti parliamentary passage of a four year $104 billion development plan (including approximately $80 billion in oil sector projects),Ambassador met with Kuwait Chamber of Commerce Chairman Ali Al-Ghanim to discuss potential opportunities for U.S. businesses. Al-Ghanim freely admitted that there would be no way that the GoK could spend $104 billion on development over the next four years, but stressed that there would be opportunities. ¶2. (SBU) Al-Ghanim explained that the projects were not new. What Deputy Prime Minister for Economic Affairs Sheikh Ahmad Al-Fahad had done, he explained, was to go to the planning board and pull out all of the stalled development projects and proposals and package them for the government and for parliament. Sheikh Ahmad did not study the capacity of the GoK or the private sector to absorb the projects in a limited time frame. Furthermore, Al-Ghanim noted, there were demographic challenges. Kuwaitis made up a third of the population. If the GoK tried to implement all the infrastructure projects called for in the next four years, it would need to import massive quantities of foreign labor and Kuwaitis would drop "to 10 percent" of the population. ¶3. (U) Al-Ghanim stressed that Kuwait would need strong foreign companies able to provide management and technical skills to implement projects. He added that good political relations between the U.S. and Kuwait helped U.S. companies. Although he said U.S. companies could bid on projects in their own name, the mechanism he recommended would be to establish joint ventures with Kuwaiti partners. The key example, he suggested, was the Equate join venture between Dow Chemical and the Kuwaitis. It included a Kuwaiti State owned company, a foreign investor (Dow),and the Kuwaiti private sector. The foreign company brought technical skills to the table and the Kuwaitis brought their understanding of the local and regional market. Al-Ghanim added that the joint venture partners could look beyond Kuwait to serve the broader region. ¶4. (U) With regard to specific sectors, Al-Ghanim stated that the power sector, the construction sector, and harbor construction all presented good opportunities. If the privatization law were passed, he suggested, there would be opportunities to manage power and wastewater utilities or to manage airports. He offered to host U.S. trade delegations and to work to facilitate cross border business interests. Ambassador suggested that it might be worthwhile to bring a delegation of Kuwaiti companies and government officials responsible for implementing the development plan to key U.S. export centers. ¶5. (U) The four year development plan is split 54% government sector and 46% private sector. Among other things, it provides for private sector participation in downstream petroleum, agriculture and in power and water projects. It calls for privatizing the transportation and shipping sectors as well as for the construction of a new container terminal, a railway (and metro),and starting construction on a new business hub (Silk City). It also includes about $80 billion in upstream and downstream oil sector investments (including major projects such as retendering a fourth refinery project and upgrading Kuwait's existing refineries to produce cleaner fuels for exports. ¶6. (SBU) Comment: It is still an open question as to how much Kuwait can implement of its development strategy. There are legal issues (including outdated tender laws),economic issues (Kuwaiti banks are still nervous about providing financing for projects),and political issues (potential parliamentary opposition and concerns about who gets which piece of the pie). For its part the Chamber of Commerce has come under attack as being an "illegal" organization (septel). That said, we are seeing more guarded optimism in the business community here that "this time there might be progress." Post would be interested in the modalities of bringing a "reverse trade mission" of potential Kuwaiti consumers to the U.S. to better educate U.S. businesses in the potential (and challenges) of doing business here. If possible, we would propose doing so in the November-December, 2010 timeframe. End Comment. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* WILLIAMS