US embassy cable - 03ABUDHABI4748

UNCLAS SECTION 01 OF 03 ABU DHABI 004748 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ARP, NEA/RA, DRL AND EB/CBA 
STATE PASS OPIC/OPIC INTERNATIONAL POLICY DEPARTMENT FOR 
VIRGINIA GREEN AND CONSTANCE SHINN 
USDOC FOR 4530/ITA/MAC/ONE/DGUGLIELMI, 
4520/ITA/MAC/ONE/CLOUSTAUNAU, 
4500/ITA/MAC/DAS/WILLIAMSON, 
3131/CS/OIO/ANESA 
 
E.O. 12958: DECL NA 
TAGS: ELAB, PREL, PHUM, PGOV, SOCI, CVIS, GTIP, TC 
SUBJECT: UAE AND OPIC -- PERFECT TOGETHER 
 
REFS: ABU DHABI 4253 AND PREVIOUS 
 
1.  This is an action request; please see paragraph 3. 
 
2.  (SBU) Summary and comment: Post believes the time is 
ripe for a dialogue between the UAEG and OPIC about 
reinstating OPIC programs in the UAE.   The suspension of 
OPIC coverage has become an irritant in the UAE-U.S. 
Strategic Partnership; senior Emirati officials have raised 
the issue repeatedly during the last year.  There are clear 
economic and commercial advantages to OPIC coverage for 
U.S. firms in the UAE: in the near term, it would improve 
the terms of financing for multi-billion dollar projects -- 
such as Dolphin Limited's plans to pipe Qatari natural gas 
to the UAE.  In the longer term, OPIC coverage would 
encourage smaller American banks to increase their exposure 
in the UAE market, and result in increased investment here 
by small-to-medium size U.S. companies.  The UAEG 
recognizes it must improve its record on workers rights, 
and indeed has taken "steps to adopt and implement 
internationally recognized worker rights." The UAEG has 
announced its commitment to enact legislation in 2004 
creating a national labor union. As currently proposed, the 
union will not permit expatriates to join as full members 
but they will have access to it via their own 
representatives. End summary and comment. 
 
3. Action Request: Post recommends that OPIC officials 
visit the UAE to discuss with the Embassy and the UAEG the 
steps the UAE needs to take to get back on coverage.  As 
the Strategic Partnership is likely to take place in late 
February, Post suggests December or January as the ideal 
time for a visit. End action request. 
 
----------------------------- 
A Strategic Partnership Issue 
----------------------------- 
 
4. (U) The UAE was suspended from OPIC insurance programs 
in 1995 because of the UAEG's lack of compliance with 
internationally recognized worker rights standards.  Since 
OPIC's suspension here, however, the UAE has ratified ILO 
Conventions 100 (February 1997) on Equal Remuneration, 105 
(February 1997) on the Abolition of Forced Labor, 111 (June 
2001) on Discrimination, 138 (October 1998) on Minimum Age, 
182 (June 2001) on the Worst Forms of Child Labor, and 81 
(April 2003) on Labor Inspections.  The UAEG also has 
implemented ILO bio-hazard rules on occupational health and 
safety.  Although the UAEG has taken ILO Conventions on the 
rights to association and collective bargaining under 
consideration, it has not yet ratified them. 
 
5. (SBU) The UAEG requested a discussion on OPIC coverage 
for the UAE as part of the first U.S.-UAE Strategic 
Dialogue in November 2002.  UAE Deputy Prime Minister and 
de facto Foreign Minister Sheikh Hamdan bin Zayid Al-Nahyan 
and de facto Finance Minister Dr. Muhammad Khalfan bin 
Khirbash have reiterated the UAEG's commitment to 
reinstating OPIC coverage in subsequent meetings with the 
Ambassador.  Throughout the year, UAE officials in the 
Ministries of Finance, Economy, and Foreign Affairs 
continually have stressed the interest of their government 
in OPIC coverage, and asked for information about 
reinstatement.  Post's Economic Section has forwarded 
information on OPIC requirements and Arabic-language copies 
of ILO Conventions. 
 
---------------------- 
Good For U.S. Business 
---------------------- 
 
6.  (SBU) UAE officials are aware of the obvious economic 
and commercial advantages OPIC programs would provide U.S. 
companies here.  U.S. firm Occidental Petroleum's local 
representative (please protect) told Econoff recently that 
OPIC coverage in the UAE and Qatar would significantly 
improve the terms of financing for the USD $2.5 billion 
Dolphin project to pipe natural gas from Qatar to the UAE. 
(Note: Oxy has a 25 percent equity stake in the Dolphin 
Project.  End note.)  Whether or not OPIC is able to offer 
the best financing terms to Dolphin, OPIC's mere presence 
among the pool of prospective lenders would provide a 
larger number of financing options.  The Oxy oil executive 
noted that political risk insurance is not necessary in the 
UAE, but external lenders with limited exposure in the 
Middle East would feel more comfortable financing a project 
in the UAE with OPIC insurance.  Indeed, Dolphin recently 
filed a formal petition with OPIC to consider reinstatement 
of its programs, and is prepared to lead a concerted effort 
of U.S. companies to lobby for OPIC in the UAE and Qatar. 
 
7.  (SBU) OPIC coverage also would level the playing field 
in the UAE for U.S. firms, which currently stand at a 
distinct disadvantage to their Asian and European 
competitors.  The Japan Bank for International Cooperation 
(JBIC) and French equivalent COFACE both have active risk 
insurance programs in the UAE.  Many more Japanese and 
French companies therefore can invest in smaller projects 
in the UAE than U.S. firms because they tie those 
investments to their national insurance programs.  OPIC 
coverage in the UAE would particularly benefit small-to- 
medium size American companies that either are leery of 
sinking significant investment into the UAE market or are 
unable to attract interest from many international lenders. 
 
8.  (SBU) The local representative for Bank of New York in 
Abu Dhabi (please protect) also mentioned that 
international banks, particularly "bankers' banks" that do 
not participant in direct financing, would welcome OPIC 
political risk insurance in the UAE.  Political risk 
insurance would entice smaller American banks to increase 
their exposure in the Middle East and provide a larger 
customer base for banks like the Bank of New York, which 
extend loans primarily to other financial institutions. 
 
--------------------------------------- 
Significant Improvement In Labor Rights 
--------------------------------------- 
 
9.  (U) Since OPIC coverage was suspended in the UAE, the 
Emiratis have improved appreciably the rights of expatriate 
laborers.  Approximately 80 percent of the population of 
the UAE is expatriate, and 98 percent of the private work 
force is non-Emirati.  UAE officials freely acknowledge 
that the vast skilled and unskilled expatriate labor force 
is a primary cause for the phenomenal economic development 
of the country since its creation 30 years ago.  They also 
argue, however, that being a minority in their own country 
carries substantial national security risks.  Emirati 
officials are apprehensive about empowering the more than 2 
million expatriate workers in the UAE with the right to 
strike or rally en masse against employers.  Expatriate 
workers, especially those in low-skill sectors, continue to 
suffer discrimination in the labor market. The UAEG 
nevertheless has committed to enacting and implementing 
domestic laws that conform to international principles. 
 
10.  (U) In addition to implementing international 
conventions (see paragraph 2 for the complete list), the 
UAEG continues to reform its domestic labor laws to better 
protect workers.  For example, the UAE Ministry of Labor 
implemented new regulations this year requiring all 
construction and maintenance companies and businesses with 
more than 200 employees, to submit audited reports 
confirming the payment of salaries to employees.  The 
Ministry blacklists companies (suspends the company's 
commercial license) that fail to submit these reports on a 
quarterly basis.  In addition, the Federal Supreme Court 
this year outlawed a common practice in the UAE of local 
sponsors holding the passports of employees.  Following the 
Court decision, UAEG Ministries publicly noted the ruling 
and declared their intention to take the necessary measures 
to enforce it. 
 
11.  (U) Currently, UAE law neither authorizes nor 
prohibits workers from forming or joining unions.  On the 
horizon, however, lies an important legislative 
breakthrough -- a law expressly authorizing the creation of 
a national labor union.  As proposed, the union will not 
permit expatriates to join as full members but they will 
have access via their own representatives.  Both the 
Minister of Labor Matar Humaid Al-Tayir and the 
Undersecretary of Labor Dr. Khaled Al-Khazraji have made 
public pronouncements that the UAEG is moving forward with 
this legislation.  Al-Khazraji noted earlier this year 
that, "Through this union, expatriate workers can carry out 
their activities through their own committees and groups 
covering each profession and area." 
 
12.  (U) The UAEG does allow workers to associate freely 
for the advancement of common goals and interests.  Workers 
address grievances and negotiate disputes or matters of 
interest, however, with employers through numerous formal 
and informal mechanisms.  Though workers are not allowed to 
engage in collective bargaining, they are authorized 
collective work dispute resolution.  In addition, private 
sector workers have engaged in numerous strikes.  The UAEG 
has acknowledged explicitly that workers have the right to 
strike.  Dr. Al-Khazraji publicly stated earlier this year, 
"The UAE labor law has not forbidden strikes... Laborers 
have rights and if they are denied them, they can stop 
working."  Thus, in practice, the UAEG fosters an 
environment that is generally permissive, and workers are 
allowed to express their grievances without fear of 
reprisal. 
 
13.  (U) Foreign labor attaches also have confirmed to 
Econoff that most labor disputes in the UAE between 
expatriates and Emirati employers are resolved informally, 
sometimes with the assistance of the various embassies. 
When informal processes fail, the embassies encourage 
workers to seek reparation through formal government 
channels, and submit their claims to the UAE Ministry of 
Labor for dispute resolution.  According to the foreign 
labor attaches, existing formal and informal mechanisms 
result in the settlement of most labor disputes. 
 
14. (U) The UAEG has taken substantial "steps to adopt and 
implement internationally recognized worker rights" -- both 
in legal and practical terms. This progress and growing 
business interest in OPIC coverage, make this the right 
time for senior OPIC officials to visit the UAE to consult 
with the mission and the UAEG on how to advance our common 
agenda further. 
 
Albright