Cablegate: Proposed Kuwaiti Investment in Kenya Appears Risky

VZCZCXRO3497
PP RUEHDE RUEHDIR
DE RUEHKU #4481 3240616
ZNR UUUUU ZZH
P 200616Z NOV 06
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 7636
INFO RUEHNR/AMEMBASSY NAIROBI PRIORITY 0154
RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS KUWAIT 004481

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/E, AF/RSA, S/CT, INL-C-CP, NEA/ARP

E.O. 12958: N/A
TAGS: EWWT EINV KCOR PTER KE KU
SUBJECT: PROPOSED KUWAITI INVESTMENT IN KENYA APPEARS RISKY
BUT LEGITIMATE

REF: NAIROBI 4741

1. (SBU) In response to ref. A, Post sees no reason to
suspect Al-Bader International Development Company (AIDCO) of
any involvement in illicit or terrorism-related activities as
a part of its proposed development project (known as the
ROOLA project) in the vicinity of Lamu, Kenya. Although
AIDCO is a new entity which has not yet implemented any major
projects, the Al-Bader Group, AIDCO's parent, is a
well-established and well-respected Kuwaiti company which
manages a diversified group of subsidiaries based in Kuwait
and operating in the Middle East and Africa. The company has
a long-standing relationship with Post's Commercial Section
and the Arab-American Chamber of Commerce.

2. (SBU) On 15 November, Econoff and Commercial Attach
received a briefing on the ROOLA project from Chairman and
CEO Yousef Al-Bader, Vice President for Middle East
Operations Mahrous Besiso, and General Manager Lubna Saif
Abbas. All three are very Westernized, open, and able to
speak intelligently about the business risks and
opportunities associated with the project. ROOLA stands for
railways, oil, (fiber) optics, Lamu Airport. The proposed
scope of this multi-phased project roughly conforms to the
summary provided in ref. A. Al-Bader made it clear to
Emboffs that the project is still at a very preliminary,
exploratory phase. No detailed feasibility studies have yet
been conducted, no design work has been done, no firm
commitments have been made, and Al-Bader has not yet begun to
formally approach prospective investors. Al-Bader expects
investors to come primarily from China, India and Arab
countries. The project would be implemented on a BOOT
(Build-Operate-Own-Transfer) basis with the building phase
expected to take about ten years and the own/operate phase an
additional 20 years. Al-Bader is seeking significant tax
concessions from the Government of Kenya.

3. (SBU) Al-Bader's goal is to take advantage of the strong
economic growth in parts of East Africa and the emerging
political stability in southern Sudan. Given current capacity
limitations in the port at Mombasa, Al-Bader sees the
potential for Lamu to become a major regional trading center
for commodities from Uganda, Ethiopia, southern Sudan, Kenya,
and maybe Congo and Rwanda. However, before making any major
commitment to the project, Al-Bader seeks further assurances
that necessary road networks and reasonably open border
crossings will be developed, that economic growth will be
sustained, and that the political situation will remain
stable (especially in southern Sudan). Al-Bader believes
that his company is well-positioned to serve as a consultant,
advisor, coordinator, and "investment consolidator" for this
project. He cites a strong relationship between Kuwait and
the people of southern Sudan due to the large amounts of
Kuwaiti aid that have flowed into the country. According to
Al-Bader, Kenyan government officials approached him and
asked him to spearhead the project based on a referral from
some of his Sudanese contacts.

4. (SBU) Although the ROOLA project appears from our
vantage point in Kuwait to be highly risky and perhaps overly
ambitious, many of the mega-projects currently being explored
and implemented by major Gulf investors and developers could
be described in the same way. The current climate of high
oil prices and rampant liquidity is leading many Gulf
investors to consider high-risk projects in search of high
returns. If ROOLA does eventually go forward, the project
will clearly be a major gamble for its investors, but based
on our research and contacts with AIDCO, we see no clear
indication that the project is a cover for illicit activities.
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For more reporting from Embassy Kuwait, visit:
http://www.state.sgov.gov/p/nea/kuwait/?cable s

Visit Kuwait's Classified Website:
http://www.state.sgov.gov/p/nea/kuwait/
********************************************* *
LeBaron

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