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Cablegate: Opic's Proposed Housing Mortgage Facility A

VZCZCXRO0398
OO RUEHROV
DE RUEHJM #0490/01 0801229
ZNR UUUUU ZZH
O 201229Z MAR 08
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0925
INFO RUEHXK/ARAB ISRAELI COLLECTIVE IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 02 JERUSALEM 000490

SIPDIS

SENSITIVE
SIPDIS

FROM CONSUL GENERAL WALLES FOR U/S JEFFERY AND DIRECTOR FORE
NEA FOR A/S WELCH; EEB FOR DIBBLE
DEPT PLEASE PASS TO OPIC FOR ROBERT MOSBACHER

E.O. 12958: N/A
TAGS: EINV ECON EFIN KWBG
SUBJECT: OPIC'S PROPOSED HOUSING MORTGAGE FACILITY A
CRITICAL ELEMENT IN ADVANCING U.S. OBJECTIVES

REF: A. STATE 25706
B. STATE 25604
C. 07 JERUSALEM 1575

1. (SBU) I appreciate the opportunity to offer my strong
support for OPIC's proposed mortgage finance facility for the
West Bank prior to the OPIC Board's consideration of the
initiative this week. We have supported OPIC's efforts to
advance this project since it was first proposed in mid-2007.
Given the unequivocal support for the project from the most
senior levels of the Palestinian Authority (PA), including
President Abbas (Abu Mazen), and from significant Palestinian
private sector developers, I believe the initiative could
have a critical economic and political impact in support of
our objective of building the infrastructure for a
Palestinian state as part of President Bush's effort to
resolve the Israeli-Palestinian conflict. More generally,
OPIC's energetic engagement in Palestinian economic issues,
including through the loan guarantee program signed last
summer, has been a tangible demonstration of USG support for
the government of Prime Minister Fayyad.

2. (SBU) Senior PA officials, including Abu Mazen and
Fayyad, have repeatedly expressed to me their support for
OPIC's initiative. On February 19, Abu Mazen wrote to
Secretary Rice in support of OPIC's contribution to the

SIPDIS
mortgage finance initiative and urged the Secretary to
support OPIC's involvement in the program in partnership with
the Palestine Investment Fund (PIF). Fayyad has also
expressed his strong support for the project to OPIC
President Mosbacher. Both Abu Mazen and Fayyad have asked
OPIC to establish the initiative early in 2008, as a catalyst
for the Bethlehem Investment Conference, which the USG is
aggressively supporting. While the actual disbursement of
funds from this initiative may take place over the medium and
long-term, prominent Palestinian developers have told us and
OPIC that approval of the proposal will serve as a catalyst
for their own development initiatives in the more immediate
future.

3. (SBU) The proposal has already garnered support from
others, including Quartet Representative Blair, who
successfully lobbied London to secure UK (DFID) support for
the project. We have (Ref B) urged Gulf States to contribute
to the program. In addition, the mortgage facility is among
the proposals being promoted through the Secretary's
U.S.-Palestinian Public-Private Partnership Initiative. The
IFC's willingness to contribute is a significant signal of
its return to the Palestinian economic scene, which the USG
has been encouraging in recent months.

4. (SBU) OPIC has, since beginning discussions on this
initiative in mid-2007, consulted closely with public and
private sector Palestinian officials. OPIC and PIF met and
corresponded regularly with the PA's Capital Market Authority
(CMA) and provided expert legal counsel to assist the CMA in
completing its earlier efforts to update and modernize the
regulatory framework governing mortgage financing in the West
Bank and Gaza. We agree with OPIC, PIF, and The Cooperative
Housing Foundation (CHF) assessments that a significant and
growing demand for affordable housing in the West Bank is not
being met and long-term mortgage financing is generally not
available to Palestinians.

5. (SBU) The PIF, having been criticized for paying too much
attention to overseas investments, has increasingly focused
on investments in the West Bank, particularly those designed
to stimulate Palestinian economic growth. The OPIC-PIF-Aspen
loan guarantee facility, announced by the President and
signed in July 2007 (Ref C), is expected to support up to USD
20 million in loans to SMEs by the end of 2008. The PIF is
also involved in the Gaza Marine Gas project, the
establishment of a second cellular phone company (Wataniya),
and multiple industrial estate proposals. Post is aware that
in conjunction with litigation against the PA and PLO in the
U.S., PIF assets have been attached in judgments. However,
those actions have not precluded previous OPIC involvement
with PIF, including the loan guarantee program noted above.
If we cannot work with the PIF, virtually no USG support will
be available for large scale private sector activities here.

6. (SBU) Post has no reason to believe that the potential
investors (listed Ref A, para 2) have any ties to terrorism,
money laundering, corruption or other violations of the law,
though we understand that OPIC will not enter into a
financial commitment until after satisfactorily completing

JERUSALEM 00000490 002 OF 002


the appropriate level due diligence.

7. (SBU) OPIC has invested a significant amount of work on
this initiative over the past seven months. I urge you to
lend your full support to the program and OPIC's efforts to
maintain hard-won momentum at this critically time.
WALLES

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