Cablegate: Dialogue On Economic Cooperation -- Follow-Up

DE RUEHGB #1061/01 0980207
R 070207Z APR 08





E.O. 12958: N/A
SUBJECT: Dialogue on Economic Cooperation -- Follow-up

REF: (A) STATE 24866, (B) BAGHDAD 789, (C) BAGHDAD 643

1. (SBU) SUMMARY: Deputy Prime Minister (DPM) Barham Salih's
follow-up team for the Government of Iraq (GOI) hosted U.S.-Iraq
Dialogue on Economic Cooperation (DEC) of February 27-28 have
proposed to pursue implementation of actionable outcomes by breaking
action items into functional groups. Once the division of labor is
agreed, the DPM will then issue a directive with specific tasks to
the High Economic Committee Secretariat within the Iraqi Council of
Ministers (CoM). We have agreed to forward this proposal to
Washington while the GOI's team vets it with the DPM. END SUMMARY.

Functional Groups and
Action Items

2. (SBU) The Government of Iraq (GOI) hosted the U.S. Government
(USG) in Baghdad February 27-28, 2008 for the U.S.-Iraq Dialogue on
Economic Cooperation (DEC). The DEC allowed senior officials from
both governments to discuss the nature of the bilateral
relationship, its future direction, and what the GOI can do to
accelerate economic growth and improve the lives of its citizens.
As a result of these sessions, the GOI and USG agreed to number of
key 'next steps' for pursuing economic growth in Iraq as well as a
follow-up mechanism to ensure actionable items are addressed
(reported reftel C). The High Economic Committee Secretariat within
the Iraqi Council of Ministers (CoM) was mandated as the
coordinating body for the GOI, and the U.S. Embassy in Baghdad is to
be its counterpart on implementing the recommendations and decisions
of the DEC.

3. (SBU) EconOffs with the assistance of other CETI elements met
several times in March with DPM Barham Salih's follow-up team to
define the approach to take for implementation. The DPM's team has
put forward a proposed division of labor that breaks the
recommendations and decisions into action items, collated into
functional groups. The list the DPM's team has proposed is as

Trade and Investment
Framework Agreement (TIFA)

-- U.S. to support implementation of Iraqi Investment Law by leading
a trade mission to Iraq.
-- GoI to seek Council of Representatives (CoR) ratification of the
TIFA; GoI and USG each to identify representatives to the U.S.-Iraq
Council on Trade and Investment (to be set up under the terms of the
TIFA), a first meeting to be held upon CoR ratification.
-- GoI seeks U.S. support to develop a legislative and regulatory
action plan to support private sector development (including
consumer protection and competition laws).
-- GoI to promote public awareness of the positive role of the
private sector in the Iraqi economy.
-- GoI seeks U.S. support in amending legislation to promote
development of additional free zones in Iraq including at Baghdad
International Airport.
-- U.S. seeks to establish a dialogue on intellectual property
-- U.S. offers to educate Iraqi businesses on the benefits of using
the Generalized System of Preferences (GSP); Ministry of Trade along
with Ministry of Industry and Minerals and Iraqi Chambers of
Commerce to support.
-- GoI to support U.S. joint ventures with Iraqi Small and
Medium-sized Enterprises (SMEs) through development of an
international arbitration mechanism and transparent government
procurement procedures.
-- U.S. Embassy will continue to facilitate visa issuance for Iraqi

Banking and Finance

-- GoI to support restructuring of Rafidain and Al-Rasheed banks (by
helping to clear foreign debt liabilities and implement
recapitalization plan); this also includes accelerated development
of Al-Rasheed's core banking system.
-- GoI to develop new legislation to regulate the relationship
between banks and the Central Bank of Iraq (replacing CPA Order 22
of 2003).
-- GoI to develop a plan to increase financing for the housing
sector and SMEs and present it to the Economic Committee by March
31, 2008.
-- GoI to support development of private banks in Iraq, including
expansion of correspondent relationships. Encourage private banks
to take advantage of Trade Bank of Iraq (TBI) training opportunities

BAGHDAD 00001061 002 OF 003

for Letters of Credit.
-- GoI to support expansion of general lending activity in Iraqi
banks, including restructuring of Industrial Bank and through the
Export Support Fund and the Economic Development Fund.
-- GoI to accelerate installation of the Financial Management
Information System, including in the provinces.


-- U.S. to offer support in drafting and implementation of a
National Energy Strategy (NES) for Iraq.
-- GoI to increase private sector participation in the electricity
-- GoI to facilitate the transition from the International
Accountability Management Board (IAMB) to the Committee of Financial
Experts (COFE).
-- GoI to improve the tender process - clear guidelines,
transparency, international arbitration.
-- GoI to work toward approval of oil and gas legislation and
implement regulatory framework for the Investment Law.


-- USAID will support improvement of institutional capacity in the
Ministry of Agriculture through the Tatweer program - USDA will
develop in-country training seminars for the IAER program.
-- USAID will assist in the redevelopment of the Iraqi date industry
through the Inma program.
-- GoI seeks U.S. support for MoA reforestation programs.
-- GoI seeks U.S. support to promote investment in the agricultural
sector, including food processing and other agriculture-based
-- U.S. agrees to investigate allegations of removal of goods from
State Company for Agricultural Supply warehouses by the U.S.

Anti-Corruption Programs

-- U.S. offers to support Iraq's efforts to join Extractive
Industries Transparency Initiative (EITI).
-- U.S. offers to support training for Iraqi Inspectors General and
to assist in the revision, as appropriate, of laws and regulations
governing activities of IGs.

Iraqi Living Conditions

-- Both sides agree to strengthen U.S./Iraq cooperation in
ministerial capacity building to improve delivery of essential
-- U.S. offers to support the Ministry of Trade's PDS reform
-- U.S. offers to support development of the Social Safety Net (SSN)
and help MoLSA to implement policies and procedures to combat
-- U.S. seeks assurances that Internally Displaced Persons are able
to receive their PDS benefits.


4. (SBU) Meanwhile, CETI elements and GOI counterparts have
continued to move forward on several of the action items agreed at
the DEC, taking advantage of the momentum developed in the Dialogue.
Updates follow:

5. (SBU) Implementation of the TIFA: On the margins of Iraq's second
WTO Accession Working Party meeting in Geneva (April 1-2), USDel
proposed to GOI representatives to hold the first meeting of the
bilateral trade and investment council in June.

6. (SBU) State-owned Bank Restructuring: TreasAtt reports that work
is advancing with a representative of the Prime Minister's (PM)
staff to organize and present a workshop addressing Bank
Restructuring. TreasAtt is in discussions with the SMART CARD
vendor that contracted with Rafidain and Rasheed Banks to bring this
service to market. TreasAtt has obtained verbal commitment of
support for the service from the Deputy Minister of Finance

7. (SBU) National Energy Strategy (NES): EnergyAtt, USAID and
Energy Fusion Cell met with the PM's advisor Thamir Ghadban to
discuss establishing a working group to draft the NES. Gadhban is

BAGHDAD 00001061 003 OF 003

to present the proposal to the GOI's Energy Committee, and report
back on action taken on the proposal.

8. (SBU) Ministry of Oil's (MoO) Ten Year Plan and proposals for
capturing flared gas: MoO's draft Ten Year Plan is vague, stating
goals but lacking clearly defined implementation plans. MoO has not
yet set a date for the final report's release. On flared gas, the
MoO's 2006 agreement with Mitsubishi and Royal Dutch Shell to
produce a Master Gas Plan (MGP) calls for the two firms to submit in
April 2008 assessments of the existing gas processing facilities,
need for future plants, as well as production, storage and usage.
Embassy's Energy Team does not know if an agreement will be signed
to extend this work on the MGP beyond April. MoO is in discussion
with General Electric for the supply of new and replacement turbines
in southern Iraq to gather and compress field gas.

9. (SBU) Reforming the Public Distribution System: Post reported
reftel B on the Ministry of Trade's (MoT) plans for radical PDS
reform. Our next step will be discussions with MoT on how to best
support the reforms.

10. (SBU) Social Safety Net (SSN): USAID met with the Chief of
Staff of DPM Salih to stress the importance of the SSN law, identify
the remaining steps to get the SSN draft into law, and identify key
contacts in the parliamentary process. USAID's project team is
planning to convert the Microsoft Access (TM) database into the
SQL-based system that will enable MoLSA to wean out beneficiaries
who might be receiving benefits through fraud. After the conversion,
beneficiaries will be required to submit missing information from
the applications prior to receiving benefits. The project team
presented a new layout for the SSN ID card to MoLSA. The World Bank
has expressed interest in providing resources for the SSN work.

11. (SBU) Extending the USDA's Iraq Agricultural Extension
Revitalization (IAER) program: USDA representatives met with the
Senior Deputy Minister (DM) of Agriculture, who has personally taken
control of the program from the Sadrist Director General for
Extension. A committee under the DMs charge will now be responsible
for candidate selection. We have agreed that more training is
needed in Iraq. FAS/Baghdad staff are traveling to Erbil the week
of April 6 to assess potential training sites, primarily to be used
for one-week training programs. Use would depend upon security and,
for some courses, the availability of hands-on agricultural
facilities. The DM suggested and USDA agreed that the IAER program
manager would identify the most promising trainees to date to
benefit from extended training, possibly in the U.S. This cadre
would become trainers for MoA extension personnel in selected areas.
(NOTE: USDA and the IAER Consortium members will meet in Washington
to review these proposals and others for the program. END NOTE.)

12. (SBU) CoR ratification of four bilateral agreements from the
July 2005 Joint Commission on Reconstruction and Economic
Development: Three of these agreements are the purview of the CoR's
Economic Committee; one falls under the authority of the Agriculture
Committee. The latter had its readings in the CoR before the
February recess; the other three were scheduled for first readings
before the recess, and now must be rescheduled. Recent combat in
several areas of Iraq have diverted attention, but as calm returns
we continue to urge that these agreements be scheduled for CoR
consideration and votes.


13. (SBU) The DPM's DEC follow-up team continues to be proactive in
pursuing an implementation mechanism through the High Economic
Committee of the CoM. We note that the majority of the follow-up
activities set out by functional group are tasked to the GoI -- at
their suggestion. We welcome Department's comments on the
suggestions for USG action, and the division of labor proposed. END


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