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Cablegate: Goe Unwilling to Budge On Qiz Approval

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PP RUEHWEB

DE RUEHEG #0068 0121402
ZNY CCCCC ZZH
P 121402Z JAN 10
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 4725
INFO RUEHTV/AMEMBASSY TEL AVIV PRIORITY 2012
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L CAIRO 000068

SENSITIVE
SIPDIS

DEPT FOR NEA/ELA
DEPT PLEASE PASS TO USTR/SFRANCESKI AND GSTRICKLER

E.O. 12958: DECL: 01/12/2020
TAGS: ECON EG ETRD PGOV IS
SUBJECT: GOE UNWILLING TO BUDGE ON QIZ APPROVAL

REF: 09CAIRO2381 Classified By: Minister-Counselor for Political and Economic Affairs Do nald A. Blome for reasons 1.4 (b) and (d).

1.(C) Key points: -The Ministry of Trade and Industry (MOTI) remains opposed to USG approval of Qualifying Industrial Zones (QIZ's) on a factory-by-factory basis. -MOTI continued to resist responding to the USG request to accept or offer corrections to the list of operating factories designated as QIZ's in Minya and Beni Suef.

2.(C) On January 6, EconOffs met with Mohamed Ashour, the head of the Qualifying Industrial Zones (QIZ) Unit in the Ministry of Trade and Industry (MOTI). Ashour told us that the GOE remains opposed to USG approval of QIZ investments on a factory-by-factory basis. Ashour argued that Egyptian businessmen would be reluctant to open factories in or relocate to Upper Egypt QIZ's if the QIZ status of factories is subject to USG approval.

3.(C) Ashour presented EconOffs with a letter for Assistant United States Trade Representative (AUSTR) Gail Strickler from MOTI Senior Advisor Sayed El-Bous that cites the 2004 QIZ Protocol claiming that only the joint committee of Egypt and Israel has the right to approve QIZ factories. EconOffs noted that for the QIZ designations of Minya and Beni Suef in January 2009, the language in the U.S. Federal Register grants QIZ status to "the areas occupied by the currently producing factories."

4.(C) Ashour refused to engage on approving a list of currently producing factories in Minya and Beni Suef. Ashour said that the QIZ Unit )- under the direction of his predecessor, Dr. Ali Awni -- made a mistake in originally providing USTR and Embassy Cairo with an inaccurate factory list for the two governorates. However, he refused to offer a revised factory list on the grounds that he does not believe the GOE is required to do so.

5.(C) Comment: In labeling the deceptive Minya and Beni Suef factory information submitted by his predecessor a "mistake," Ashour made it clear that he is seeking a more frank dialogue on QIZ expansion. Despite this, it is equally clear that the MOTI direction on this issue is coming from El-Bous, who has been extremely inflexible in defending what he considers Egyptian "rights" under the QIZ agreement. Despite a professed desire to use QIZ as a tool for much needed growth in Upper Egypt, the GOE has yet to move forward in certifying the revised list of factories designated as QIZ's a year ago.

6.(C) Action Request: In Post's view, there is limited progress to be made while the USG and GOE are talking past one another. We recommend that USTR send a letter to Minister of Trade and Industry Rachid M. Rachid specifying exactly what is required of them to resume progress in our discussions on QIZ expansion to Beni Suef, Minya, and possibly other regions of Upper Egypt. SCOBEY

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