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Cablegate: Provincial Investment Commission Priorities in Muthanna

VZCZCXYZ0000
RR RUEHWEB

DE RUEHGB #3682/01 3261355
ZNR UUUUU ZZH
R 211355Z NOV 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 0493
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS BAGHDAD 003682

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON PREF EAID ETRD IZ
SUBJECT: PROVINCIAL INVESTMENT COMMISSION PRIORITIES IN MUTHANNA

Ref A: Baghdad 3492
B: Baghdad 3256

1. (U) This is a PRT Muthanna reporting cable.

2. (SBU) Summary: On November 17, the Muthanna Provincial Investment
Commission (PIC) met with the PRT's EconOff and business development
adviser to discuss the PIC's priorities and investment strategy. In
contrast to the agricultural focus in Muthanna, the PIC seeks to
build a substantial heavy industry base in the province. The PRT,
in conjunction with Embassy Baghdad, will work to assist the PIC
train and otherwise build capacity in the foreseeable future. End
summary.

3. (SBU) On November 17, Muthanna's Provincial Investment Commission
(PIC) chairman Adel Dakhel Mohammed Al-Yasiri and board member Abdel
Kareem Yaseen met with the PRT's PAO and business development
adviser to discuss the PIC's priorities, plans, investment strategy,
and current operations. Muthanna's operation appears to be
considerably ahead of its provincial peers, as the PIC has developed
an "investment map" of priorities, has hired a professional staff of
60, and has licensed several foreign investments with more currently
under negotiation.

----------------------------------------
THE "INVESTMENT MAP" INDUSTRIAL STRATEGY
----------------------------------------

4. (U) In contrast to many other provinces, Muthanna's PIC has
developed a comprehensive economic development strategy, dubbed its
"Investment Map." This document has a number of attributes often
found in local economic development marketing materials in the
United States or elsewhere: an economic, demographic, and cultural
description of the province, investment priorities of the
commission, and available sites for projects, complete with aerial
pictures and descriptions. This investment map initially seeks
investments in heavy industry, especially in cement, brick, iron,
and chemical (e.g. caustic soda, chlorine, and lime) manufacturing.
This is consistent with previous open source reports on the PIC's
activities (ref A). Secondarily, the PIC discussed an interest in
housing projects.

5. (SBU) The PIC chose these industrial and housing sectors because
(1) there is an immediate need for all of these products in the
province or southern Iraq more generally and (2) available raw
materials exist locally for manufacturing. When PRT staff
questioned the manufacturing emphasis, given that Muthanna is a
largely agricultural province, the PIC chairman responded that no
international investor is very interested in agriculture. The
benefit of agriculture, however, is that it generates far more
employment per dollar invested as opposed to heavy industry. Given
Muthanna's very high unemployment rate, employment generation is a
critical need in the province (ref B).

------------------------------
TRAINING AND CAPACITY BUILDING
------------------------------

6. (SBU) PRT staff discussed training opportunities and capacity
building needs of the PIC and its staff. In addition, the PRT asked
for feedback from the recent training session in Irbil. PIC members
indicated that the training was useful, especially given that the
idea of foreign investment in Iraq (outside of the oil/petrochemical
industry) is largely new. They specifically asked for training for
their professional staff. Although they have seven staffers in
their technical and economic section, for example, these individuals
do not have substantial experience in evaluating projects, and
additional training for them would be helpful.

7. (SBU) The PRT business development adviser and PAO noted that
they have expertise in cost/benefit analyses, investments,
acquisitions, and management that would be useful training topics.
The PRT offered to conduct such training either at the Mittica
training center on Tallil Air Base or at the PIC building in
Samawah. PRT business development adviser stressed that the project
evaluation and cost/benefit part of their work is critical.
Approving quality projects will pay large future dividends to the
economic development of Muthanna.

-------------------------------
DESIRES FOR AMERICAN INVESTMENT
-------------------------------

8. (SBU) The PIC chairman was very interested in discussing
opportunities for American investment in Muthanna. PRT staff
stressed that the organization is an arm of Embassy Baghdad/U.S.
Government and does not represent any particular American investor
or business. The PRT did agree to contact Embassy Baghdad to
facilitate a meeting between Embassy officials and the Muthanna PIC.
The PIC chairman concluded this part of the discussion by noting
that there are only so many investment prospects in the province,
and American business could lose an opportunity. Given good
relations with the United States, the PIC chairman would prefer to
see America invest in local opportunities instead of some other
country. (Note: Concurrent to our meeting, the PRT Team Leader and
the Deputy Commanding General for MND-C together held courtesy calls
with Muthanna's Governor and the Provincial Council Chair(PCC). In
each case, when they broached the subject of the PIC and foreign
investment, both the Governor and the PCC echoed the PIC's call for
American investment and indicated they would pull all the stops to
facilitate the process).

---------------------------
CURRENT AND FUTURE PROJECTS
---------------------------

9. (SBU) By the end of October, the PIC had signed six investment
licenses on a variety of projects, including a shopping mall, a
tourism facility, a hospital, and a new cement plant. In total, the
value of these investments equals some 334.25 million USD. The
largest of these is the new cement plant, valued at 249 million USD.
The cement plant will be financed by a wealthy Iraqi businessman
and built by the Chinese CNBM company. The project will include a
35 megawatt (MW) generator that will power the facility.

10. (SBU) Given this discussion, PRT staff asked about the two state
owned cement plants that exist in Muthanna. The PIC chairman
indicated that these plants are controlled by the Ministry of
Industry and Minerals and therefore are not within the PIC's
purview. When PRT staff asked the PIC chairman whether or not there
is a plan for coordination between Muthanna PIC staff and ministries
in Baghdad, the answer was, in very roundabout terms, "no."

11. (SBU) The PIC chairman briefly discussed current negotiations
with foreign investors. Much of this time was spent discussing a
second cement plant -- this time funded by a German company -- that
is nearing final negotiations. The PIC chairman also discussed
ongoing investment negotiations with Kuwaiti, Saudi, Chinese, and
Iranian companies in general terms, but noted that these are in
various stages. Recent open source reporting has suggested that
investments under negotiation total about 1 billion USD.

-------
COMMENT
-------

12. (SBU) The Muthanna Provincial Investment Commission appears to
be better developed than some of its peers around the country.
Muthanna's PIC has a very active chairman, who is eager to meet with
anyone and everyone who may have the ability and interest to invest
in Muthanna. To that end, the PIC has developed both written and
online marketing materials; additionally, they have developed a
nascent advertising campaign that they have used to garner interest
in the province. These efforts are better developed than many other
provinces.

13. (SBU) Comment con't: One substantial shortfall is the lack of
coordination between the PIC and GOI ministries in Baghdad. Since
much of the potentially available land for projects, according to
the PIC chairman, is owned by either the Ministry of Finance or the
Ministry of Municipalities, the commission's efforts are not as
efficient as they could be. While the chairman noted that this is a
major obstacle or challenge to the PIC's efforts, he did not seem
entirely motivated to work with GOI ministries to change the status
quo. Nevertheless, the PIC, with the training and capacity building
support of the PRT, will continue to work to increase the economic
development of Muthanna. End comment.
CROCKER

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