US embassy cable - 04MANAMA1225

C O N F I D E N T I A L MANAMA 001225 
 
SIPDIS 
 
NOFORN 
 
DEPT FOR NEA/ARP AND DRL:KAUDROUE 
DEPT PASS USTR JBUNTIN, CMILLER, WCLATANOFF 
COMMERCE FOR CLOUSTAUNAU 
LABOR FOR LKARESH 
 
E.O. 12958: DECL: 08/01/2014 
TAGS: PREL, ETRD, KTEX, ELAB, BA, KSEC, KINR 
SUBJECT: (C/NF) MINISTER OF INDUSTRY TALKS SECURITY AND FTA 
 
Classified By: CDA Susan Ziadeh, Reasons 1.4 (b) and (d) 
 
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(C/NF) SECURITY 
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(C/NF) 1. Minister of Industry--and more importantly trusted 
Senior Advisor to the King (and a member of his informal 
kitchen cabinet)--Dr. Hassan Fakhro opened and closed his 
August 2 welcoming meeting with Charge by addressing our 
current security relationship.  The Minister straight-away 
said that the possible DODDS Bahrain School closure is 
unsettling to many in Bahrain, noted its central role in 
cementing the bilateral relationship, and pressed for the 
issue to be resolved soon. Charge said that, with the school 
year fast approaching, the USG is moving toward a final 
decision. 
 
(C/NF) 2. The Minister, who attended the G-8 Sea Island 
Summit with the King, noted that the King has tremendous 
respect for President Bush and that he and the Crown Prince 
have strong relations with the Administration.  Having 
established the King's and the Crown Prince's pro-U.S. 
stance, the Minister said that "higher-ups" would work with 
the Embassy on all issues, security in particular, and would 
provide answers to satisfy us, if we let them know what it is 
that we need.  The Minister sees a lack of communication as 
the root cause for the current state of the U.S.-Bahraini 
security relationship and offered personally to act as 
Embassy's direct but informal channel to the King.  Most 
importantly, the Minister said that in times of stress, it is 
important to maintain a cool head, to communicate, and not to 
overreact.  "Overreaction can create problems," was his final 
statement. 
 
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(U) FTA 
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(U) 3. On FTA, Minister Fakhro told Charge August 2 that 
Bahrain depends on the U.S. for its economic guidance. 
Responding to Charge's question of what we could do to help 
implement FTA successfully, the Minister said that USG and 
consultants are already studying available resources to 
maximize benefits.  He said business, too, particularly in 
the textiles sector, is studying the text of the FTA 
carefully to discover in the fine print ways to profit from 
the agreement.  The ongoing public comment period is helping 
the learning process along, and one day, the Minister noted, 
"we will all be wiser."  There is already interest in new 
industrial investment, and the Minister expects this interest 
to increase once the FTA is finalized. 
 
(U) 4. Exhibiting Pollyanna-like optimism, the Minister 
pointed to tremendous post-FTA textile job creation in 
Jordan, and said that he expects the textile and garment 
industry sector to benefit most from the FTA.  He noted the 
industry's interest in expanding existing factories and 
starting new garment factories.  These developments would 
affect employment considerably, he said, especially if 
Bahrainization rates reach the targeted 80 to 90 percent. 
Asked about the industry's ability to compete with global 
labor markets, the Minister admitted that industry would need 
to work on this issue, but quickly added that the people 
employed in this industry would not readily be employed 
otherwise, and so would be willing to accept "reasonable" 
salaries, allowing the factories to remain competitive. 
 
(C)  5.  Comment:  Fakhro is clearly worried that closure of 
the school will damage Bahrain's ability to attract foreign 
direct investment, undercutting the positive momentum of the 
FTA signing.  For moderate, oil-poor and majority Shi'a 
Bahrain, a loss of economic confidence or flight of expat 
businesses to Dubai and other regional locales offering 
competitive services - including top-flight schools - would 
be a heavy blow that could slow, if not derail, the GOB's 
political and economic reform program. 
ZIADEH