US embassy cable - 04ABUDHABI932

UNCLAS SECTION 01 OF 04 ABU DHABI 000932 
 
SIPDIS 
 
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 ITA/MAC 
STATE PASS USTR FOR JASON BUNTIN AND DOUG BELL 
 
E.O. 12958: N/A 
TAGS: ELAB, PREL, PHUM, PGOV, SOCI, CVIS, TC 
SUBJECT: OPIC VISIT READOUT 
 
 
1. SUMMARY: A delegation from the Overseas Private Investment 
Corporation (OPIC) visited the UAE February 27 to 29 to assess 
progress on labor rights issues.  They met with representatives 
from the Ministries of Finance and Industry, Labor, Foreign 
Affairs, and the Central Bank, as well as U.S. banking and 
business representatives.  The Ministry of Labor told the 
delegation that it expects the revised labor law and related 
amendments to be passed in June or July.  While OPIC was 
impressed with the progress the UAE has made regarding labor 
conditions since it suspended coverage in 1995, the delegation 
told the UAEG that OPIC would need to review the proposed labor 
law, once it is ratified and implemented, before it could 
consider re-opening in the UAE.  OPIC pushed to have the revised 
law ready to be announced at the June ILO meeting in Geneva. END 
SUMMARY. 
 
2. OPIC Executive Vice President and Chief Operating Officer 
Ross Connelly, Deputy Chief of Staff and Senior Advisor to the 
President Dulce Zahniser, and Vice President of the Office of 
Investment Policy Virginia Green met with Minister of State for 
Finance and Industry Dr. Mohamed Khalfan bin Kharbash, Labor 
Ministry U/S Dr. Khalid Al Khazraji, MFA Assistant U/S for 
Political Affairs Abdullah Rashid Al Noaimi, and Central Bank 
Governor Sultan Nasser Al Suwaidi.  The delegation also met with 
Bank of New York Vice President and Regional Representative Hani 
Kablawi, and Manager of the Abu Dhabi office of Occidental 
Petroleum David Scott.  Green also met with Philippine Embassy 
Labor Attach€Annabella Oliveros, had lunch with members of the 
American Business Group, and traveled to Dubai to meet with 
representatives from Citibank and with the Head of Financial 
Institutions at the Dubai International Financial Center, Sandy 
Shipton. 
 
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HISTORY 
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3. OPIC suspended coverage in the UAE in 1995 due to its lack of 
compliance with internationally recognized worker rights 
standards.  Since then, the UAE has taken a number of important 
steps to conform with international labor norms, including 
ratifying ILO conventions 100 (Equal Remuneration), 105 
(Abolition of Forced Labor), 111 (Discrimination), 138 (Minimum 
Age), 182 (Worst Forms of Child Labor), and 81 (Labor 
Inspections).  The UAEG has also implemented ILO bio-hazard 
rules on occupational health and safety.  Although the UAEG is 
considering ILO conventions 87 and 98 on the rights of 
association and collective bargaining, it has yet to ratify 
them.  The OPIC delegation stressed the importance of ratifying 
these conventions and protecting through legislation workers' 
rights in these areas, in addition to passing labor reform 
legislation. 
 
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FINANCE AND INDUSTRY MINISTRY 
----------------------------- 
 
4. OPIC met with the Minister of State for Finance and Industry, 
Dr. Mohamed Khalfan bin Kharbash.  MFA Assistant U/S for 
Political Affairs Abdullah Rashid, Finance U/S Khalid Bustani, 
the DCM and Poloff (notetaker) were also present.  Kharbash 
stressed the importance the UAE places on reinstating OPIC 
coverage, and asked what could be done to speed up the process. 
Connelly said that he would like nothing more than to resume 
business in the UAE.  However, problems in the human rights 
arena remain unresolved, and OPIC will only be able to reopen in 
the UAE after it sees significant progress in labor rights 
implementation, he said.  He emphasized that prospective reforms 
would not be enough for OPIC to restore coverage.  Kharbash 
stated that he understood OPIC's position, and discussed 
measures the UAE is taking to comply with international norms, 
including the proposed labor legislation currently under 
consideration.  However, he said that negotiations shouldn't get 
"stuck" while waiting for the proposed labor law.  Dialogue must 
be on-going, since both the UAEG and U.S. companies will benefit 
from OPIC reinstatement.  Connelly responded that Kharbash was 
"preaching to the choir," and that increasing business and 
opening financial institutions in this part of the world was a 
priority for the U.S., not only to profit the businesses, but 
also to assist in Iraqi reconstruction.  Once worker rights were 
ensured, OPIC would be ready to open for business.  Green added 
that this could happen by the end of this year. 
 
5. Bustani pointed out that time was key, and that several fast- 
moving projects could miss out on coverage.  Kharbash added that 
there is no such thing as a perfect solution to the labor issues 
the UAE faces, however, the UAE and U.S. must be able to work 
through the issues and strengthen their strategic relationship. 
Abdullah Rashid said that the UAE wants to see more U.S. 
businesses open soon, especially in the oil industry.  He hoped 
that labor issues would not hinder this kind of development. 
 
6. Connelly responded to all these points by stating that OPIC 
has laws and Congressional mandates to follow, and that other 
institutions contribute to OPIC's decision to reopen.  He said 
that he must provide those institutions with information on the 
UAE's progress so that all parties can jointly make an informed 
determination.  The DCM also asked the Emiratis to encourage the 
Ministry of Labor to accelerate the passage of the proposed 
labor legislation and the related amendments.  The meeting 
adjourned with all parties agreeing to keep the lines of 
dialogue open. 
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MINISTRY OF LABOR 
----------------- 
 
7. At the Ministry of Labor, the delegation met with Labor U/S 
Khazraji.  Connelly explained that the final determination of 
whether OPIC reopens in the UAE rests with the State Department 
and ILO in addition to OPIC.  He said that the main issue that 
will determine how fast the agency can reopen is labor rights. 
Once the key areas for improvement are resolved, the parties 
will be able to make a decision to reinstate OPIC coverage. 
 
8. Green and Khazraji discussed the UAE - ILO cooperation and 
the new draft labor law.  Khazraji explained that the proposed 
law does not address some areas of concern, such as the use of 
underage camel jockeys and the creation of labor organizations. 
However, while the federal Cabinet considers the proposal, the 
MOL is working on amendments to cover these areas.  He said that 
all the issues cannot be tackled at once, but the MOL has been 
working with the ILO for two years on the labor law and other 
labor issues, balancing the need to conform to international 
norms with the UAE's areas of concern, including its extremely 
high proportion of foreign workers (estimated at up to 98% of 
the private workforce).  Khazraji said that all issues must be 
studied before moving to the next stage, since the Ministry 
wants to "do this right."  But he emphasized that the process is 
moving forward, and the UAE is working on all the issues the ILO 
has pointed out as "weak areas."  He said that he hoped that the 
proposals would be reviewed soon, however, the Cabinet has other 
issues on its agenda as well, and a final decision might be 
three to four months away. 
 
9. Khazraji urged OPIC to look at the overall picture when 
making its determination.  He said the UAE does not have large 
problems with its labor force.  There are some disputes, but no 
child labor.  Safety laws exist.  Labor rights are protected, 
even without unions and under the old labor law.  Many people 
still want to come to the UAE to work, and this would not be the 
case if laborers were treated poorly, he said.  Connelly 
recognized that the UAE's potential was tremendous.  However, 
the few outstanding labor problems are all that is preventing 
OPIC from reopening. 
 
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MFA 
--- 
 
10. During a separate meeting with U/S Abdullah Rashid, Connelly 
requested that he use his political clout to push the labor law 
to the "front of the line" of legislation waiting for Cabinet 
review.  He also said that he hoped that, like Qatar, the UAE 
would be able to announce the new legislation at the June ILO 
conference in Geneva. 
 
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BANKING AND BUSINESS SECTORS 
---------------------------- 
 
11. The OPIC team rounded out its visit with meetings with the 
Bank of New York (BONY), Occidental Petroleum (OXY), and the 
Central Bank of the UAE.  While the delegation explained the 
necessity to improve labor conditions before it could reopen, 
conversations quickly drifted away from labor issues and onto 
increasing business and banking opportunities in the UAE and in 
Iraq.  At BONY, Vice President and Regional Representative Hani 
Kablawi and Connelly discussed how they could work together in 
the future to increase business opportunities, especially in the 
lesser-developed Northern Emirates.  BONY said that it might be 
more comfortable financing investments in the Northern Emirates 
using OPIC's risk mitigation and term credit finance services. 
 
12. At OXY, Abu Dhabi Office Manager David Scott said that his 
organization is anxious for OPIC to reopen.  He gave the team a 
Dolphin Project overview, and said that OXY primarily wants to 
involve OPIC for the comfort of financiers who may not otherwise 
be comfortable investing in this part of the world.  The Dolphin 
Project needs financing as soon as possible.  OXY has a June 
deadline to either go with OPIC or look elsewhere.  Connelly 
said that OPIC is also eager to open in the UAE and Qatar, 
however, it cannot do so without a change in labor conditions, 
backed by law.  Since the ILO and State Department were key in 
the decision to end coverage in 1995, OPIC has decided to rely 
heavily on their judgement before reopening, Green said.  She 
said that international labor standards have risen since 1995. 
The UAE's standards currently are "good," but additional work is 
needed on implementation.  Scott expressed his concerns about 
relying too heavily on the ILO's opinion, since, in his view, 
the ILO has had a historically bad relationship with the UAE and 
may not be completely objective. 
 
13. At the Central Bank, Governor Al Suwaidi and Connelly 
discussed business opportunities and challenges in Iraq, 
Afghanistan, and the UAE.  Suwaidi said that, despite the 
difficulties of investing in Iraq and Afghanistan, the Gulf 
region is the best place to provide banking support, and the UAE 
was the best place in the region to provide this support, due to 
increased stability and fewer sensitivities. 
 
14. Green met separately with the American Business Group, 
including President John Velliquette of Raytheon, and members 
Charles Laubach of Affridi & Angell Law Firm, Frank Wayne of the 
Abu Dhabi Investment Authority, Michael Tomalin and David 
George, both of the National Bank of Abu Dhabi.  The group 
consensus was that labor conditions were no longer poor and 
should not be a deterrent.  They also said that business 
conditions for U.S. investors in the UAE is excellent, and any 
smart investor who knows the region should not require an OPIC 
safety net.  If someone is basing a decision to open a business 
here on OPIC coverage, the group said that that person should 
just look elsewhere and leave the potentially excellent business 
opportunity for a more savvy investor. 
 
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LABOR ATTACHE MEETING 
--------------------- 
 
15. Philippine Embassy Labor Attach€Annabella Oliveros 
explained that about 170,000 Filipinos work in the UAE. 
However, she said that the 18,000 Filipinas working as domestic 
servants faced the most problems, since they are not covered by 
the labor law.  She handled approximately 500 cases of non- 
payment of wages last year.  She said that the UAEG is generally 
responsive, but too often sides with the employer, since the 
maids usually run away from their sponsors before the problems 
are resolved.  The employer then trumps up charges against the 
maid, who is then arrested, deported, and never paid.  She said 
that she handles about 100 rape cases per year.  Of the 
approximately 150,000 workers who are not domestic servants, 
approximately 5% go unpaid regularly. 
 
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DUBAI MEETINGS 
-------------- 
 
16. In Dubai, Green and the Consulate's Pol/Econoff met with 
five Citibank representatives to discuss Citibank's plans to 
provide services and assistance in Iraq.  Green also met with 
the Head of Financial Institutions at the Dubai International 
Financial Center (DIFC) to discuss banking and DIFC's role as an 
"off-shore banking center" for the Middle East, and potential 
OPIC projects.  She also invited DIFC representatives to give 
their presentation in Washington during its "road show" this 
summer. 
 
17. COMMENT: It was clear from the meetings that the UAE has 
made great advances in improving labor conditions for workers 
since OPIC withdrew its services in 1995.  However, the sticking 
points remain the still-pending labor legislation update, and 
the unratified ILO conventions on the rights of association and 
collective bargaining (87 and 98).  The OPIC delegation left no 
doubt that the implementation of a labor law that protects the 
rights of all workers, including the non-citizens who comprise 
approximately 98% of the UAE private sector workforce, was the 
beginning point in determining if the UAE has made enough 
progress to warrant reinstatement of OPIC coverage.  The 
proposed labor law, and proposed amendments to the law, will 
have to be passed and implemented, then studied by OPIC and 
other organizations with a say in whether OPIC re-opens here. 
While the UAE meets with the ILO regularly, has implemented a 
number of ILO conventions, and is addressing ways to allow 
freedom of association and collective bargaining while balancing 
the UAE's security concerns, the OPIC delegation made it clear 
that there is still work to do before OPIC will reinstate 
coverage in the UAE.  END COMMENT. 
 
18. Members of the OPIC delegation did not have the opportunity 
to clear on this cable. 
 
WAHBA