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Cablegate: Basrah Development Commission Promotes Investment In

VZCZCXRO2093
PP RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHBC #0061/01 1700925
ZNR UUUUU ZZH
P 180925Z JUN 08
FM REO BASRAH
TO RUEHC/SECSTATE WASHDC PRIORITY 0773
INFO RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0356
RUCNRAQ/IRAQ COLLECTIVE
RUEHBC/REO BASRAH 0810

UNCLAS SECTION 01 OF 02 BASRAH 000061

SIPDIS

E.O. 12958: N/A
TAGS: EINV EPET ENRG ECON KCRM IZ
SUBJECT: BASRAH DEVELOPMENT COMMISSION PROMOTES INVESTMENT IN
SOUTHERN IRAQ

BASRAH 00000061 001.2 OF 002


1. (U) Summary: Since the establishment of the Basrah
Development Commission (BDC) in October 2007, the British
Government and the Basrah Provincial Council have been working
closely on strategies to promote development and attract foreign
investment in southern Iraq. The BDC has undoubtedly served as
an excellent resource in helping local government officials and
business leaders shape their development strategy for the
province. However, supported by the UK-led Provincial
Reconstruction Team (PRT), BDC initiatives have primarily
targeted British and regional audiences. Since its inception,
the BDC has sparingly reached out to potential American
investors and, as the commission becomes more entrenched in
Basrah's economic future, U.S. investors will find themselves at
a distinct disadvantage absent a comparable U.S. foreign
commercial presence. End Summary

2. (U) Established in October 2007, the Basrah Development
Commission (BDC) is a joint UK-Iraqi initiative with two
principal objectives: to assist local government in
implementing a regional development strategy and to promote
foreign investment. Since December 2007, the BDC has been
supported by the British-led PRT; with a large staff funded by
DFID's Coffey contractors. Its efforts to support economic
development have been consistent with Provincial Council
initiatives, including the council's Provincial Development
Strategy. The USD 215 million strategy is the most
comprehensive plan created and endorsed by the stakeholders who
live in the province. It provides a broad picture of economic
and social development conditions, and it outlines over 2000
projects covering seven provincial districts and 16 service
sectors. As a uniquely local assessment, the BDC and the
Provincial Council hope the strategy serves as the principal
tool in developing a coordinated effort to revitalize the
province's struggling economy. However, with 70 percent
shortfall in funding, the Council realizes it must aggressively
attract foreign investment.

3. (U) As Iraq's economic gateway, Basrah accounts for around
70% of the country's oil reserves and has its only deep sea
port. The region has historically had a thriving agricultural
sector and was once one of the world's largest producers of
dates. Basrah (by air or land) is the traditional port of entry
for most pilgrims to the Shia holy sites to the North. The
province has the potential to develop into a hub for business
travel and tourism. Understanding Basrah's importance to the
overall economic health of the country, promoting foreign
investment has become Provincial Council's most important
economic objective. During an June 3 meeting, Zuhair Ali
Akbair, General Manager for the Basrah Branch of the Central
Bank, asked the REO for USG assistance in attracting foreign
banks to Basrah. He emphasized the important role foreign banks
could play in promoting greater security and improving good
governance, adding that an influx of capital would promote both
foreign and local investment toward the development of new
businesses which would, in turn, create long-term employment
opportunities. Zuhair also stressed the need for foreign
assistance in supporting the provinces many state-owned
enterprises.

4. (U) Absent a locally-based foreign commercial service in
Basrah, the BDC has taken the lead in serving as the liaison
between foreign investors and the provincial government. In
March, the BDC hosted its first conference, held in Kuwait, to
engage with investors to discuss how the commission can help
foreign companies enter the market. In mid-May, the BDC held
another event in London for 54 investors interested in
opportunities across sectors. The BDC is also developing the
Basrah Development Fund to address weaknesses in the banking
system and improve access to credit for local small and medium
enterprises.

5. (U) During the past two months, the Basrah Governor Mohammed
Waeli has met with selected BDC Commissioners to discuss the
development of the Basrah Investment Promotion Agency (BIPA).
The National Investment Law (No 13 of 2006) mandates the
establishment of a National Investment Commission and regional
or governorate level investment commissions with powers to grant
investment licences, identify strategic investment
opportunities, promote investment and give effect to and
guarantee the provisions of the investment law. The BIPA has
the vision that Basrah will be a destination of choice for
discerning foreign and local investors, and the destination of
choice in Iraq. According to the Iraq National Investment
Commission, excluding matters related to oil and gas exploration
and banking and insurance, no legal investment into Basrah can
take place without the formation of an investment promotion
agency and appointment of a suitably qualified Board. Waeli has
agreed to take the appointment of the BIPA Board forward at the
earliest opportunity. Once the BIPA is formed, it will be
charged with attracting investment to Basrah, stimulating
economic development, and implementing a procedural standard for

BASRAH 00000061 002.2 OF 002


trade and investment in the province. The BDC recently sent a
BIPA Lead Adviser from London to Basrah to assist with the
creation of a BIPA Charter, help with the BIPA's organization
development, and assist in the formulation of the BIPA
operational and business plan.

6. (U) The specific objectives of BIPA are to promote investment
and transfer modern technologies in order to contribute to the
process of developing and enhancing Basrah, and expanding and
diversifying its production and service base; encourage the
Iraqi and foreign private sector to invest in Basrah by
providing the required facilities for establishing investment
projects and enhancing Basrah's competitive advantage; help to
protect the rights and property of investors; foster expansion
of exports and improvement of the balance of payments and the
balance of trade of Iraq; and foster development of human
resources based on market demand to create work opportunities
for Iraqis in Basrah.

7. (U) COMMENT: Without USG direct involvement, the
British-Iraqi organized investment plan places future U.S.
investment at a disadvantage. In addition to a non-existent
U.S. role in the development of the provinces legal framework
for foreign investment, the BDC can potentially influence uneven
trade and investment restrictions on U.S. businesses and other
foreign investors in the region. The aim of the BDC to promote
foreign investment is salutary and important. Our only concern
is that it may not cast a wide enough net to attract U.S.
investors that would be equally important for southern Iraq's
future. REO suggests that the U.S. Foreign Commercial Service
or the REO as its proxy seek to integrate more with the BDC to
make it truly a Coalition effort. No PRT U.S. coalition members
are part of the team. Credit should be given where credit is
due, and recognizing that this is a UK initiative supported by
the UK-led PRT is important, but partnering with the U.S. and
other coalition countries (Denmark, Romania, Australia) as well
as other donor nations (Japan, Italy) might lead to more overall
success. Failing this, perhaps a companion effort by the USG
would bear fruit, especially in some obvious areas such as oil
and gas. END COMMENT.
HOWARD

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