US embassy cable - 05KUWAIT726

UNCLAS SECTION 01 OF 02 KUWAIT 000726 
 
SIPDIS 
 
FOR USDOC 4520/ITA/MAC/OME/CLOUSTAUNAU/TSAMS/COBERG 
FOR USDOC 3131/USFCS/OIO/ANESA/TGILMAN 
 
E.O. 12958: N/A 
TAGS: ENRG, EPET, SENV, TBIO 
SUBJECT: COURTESY CALL OF FEB. 9 ON CHAIRMAN OF KUWAIT 
CHAMBER OF COMMERCE AND INDUSTRY (KCCI), MR. ALI ALGHANIM, 
BY AMBASSADOR LEBARON AND COMMERCIAL SERVICE STAFF. 
 
REF: KUWAIT 00661 
 
1. (SBU) Summary:  Mr. Ali Alghanim spoke enthusiastically of 
the existing strong ties at all levels between the U.S. and 
Kuwait and hoped that such relations would be increased 
especially in investment.  Kuwait and Iraq have immediate 
opportunities for joint ventures, and Iran could eventually 
be a viable market as well.  He offered additional contact 
and support from the Chamber for American companies, and to 
support education in general and professional training in 
particular for interested Kuwaitis.  End summary. 
 
2. (SBU) On Feb. 9, Ambassador and Commercial Service staff 
made a courtesy call on Mr. Ali Alghanim, Chairman of the 
Kuwait Chamber of Commerce and Industry (KCCI).  (Mr. 
Alghanim comes from one of the most prominent merchant 
families of Kuwait, and is highly successful politically as 
well as commercially.)  He opened his comments by describing 
the excellent relations which he and the Chamber have with 
the Kuwaiti Ministry of Commerce and with the U.S. Chamber of 
Commerce and the USG in Washington, D.C.  He and several 
Chamber delegates had traveled with the Minister of Commerce 
in 2004 to Washington D.C., and were well received. They also 
accompanied the Minister on an extensive trip to Asia in 
summer 2004. He described the historical relations which 
Kuwait has enjoyed with Iraq, touted the many levels of 
contacts between the two countries and noted that the Chamber 
supports Iraqi business visitors with their visa applications. 
 
3. (SBU) Alghanim believes that 2005 will be an even better 
year for the Kuwaiti economy than 2004, with important 
changes ahead.  Kuwait has been reaching out to other 
countries such as Japan, Korea, China and Singapore, and the 
Chamber was fully engaged in such commercial exploration. 
However, he added that Kuwait prefers doing business with 
Americans since the Kuwaitis understand America better than 
most other nations.  He invited American firms to contact the 
Chamber for assistance.  He added that the GOK tendering 
process is different from that of the U.S.A., but the Chamber 
has strong relations throughout the GOK and could be helpful 
to U.S. firms attempting to penetrate the tendering process. 
The Chairman cited very recent meetings with the Ministers of 
Energy, of Justice and of the Interior as proof of the 
Chamber,s weight. 
 
4. (SBU) Ambassador offered a few observations on the Kuwaiti 
commercial climate. 
 
   a. Kuwait is in transition away from the requirement for 
foreign companies to have agents, and moving toward 
investment issues.  This was a new development for the 
economic community, and Kuwait was feeling its way. The TIFA 
and the FTA discussions had the support of the Kuwaiti 
leadership, but they perceived the benefit as being political 
rather than economic.  Kuwait does not seem to want a 
bilateral economic agreement as much as other Gulf countries. 
 
   b. the GOK has a shortage of trade and investment experts. 
 There are some very well-qualified individuals but its 
bureaucratic system is thin.  FTA will be hard to negotiate, 
with the USA seeking to discuss many complex issues such as 
protection of IPR, investment regulations and the WTO. 
 
5. (SBU) Alghanim did not respond directly to the 
Ambassador,s points above but remained focused on the strong 
relations between the two countries, and the advantages of 
joint ventures between Kuwaiti and Americans.  He 
acknowledged that Kuwaiti investment law is not at the level 
that the Kuwaiti private sector would prefer.  One obstacle 
is corporate taxation; although he had helped EQUATE (a joint 
venture between Dow Chemical and the GOK-owned Petrochemical 
Industries Company) to receive special tax treatment, he said 
he could not do this for each and every company. 
Nevertheless, any company can come to the KCCI for help.  He 
stated, "we have more than excellent relations with the Prime 
Minister." Alghanim also mentioned briefly the notion of the 
creation of an American-Kuwaiti joint investment fund, to 
support both groups. 
 
6. (SBU) The Ambassador asked Alghanim,s opinion of several 
large projects: 
 
   a. the mega-project called Az-Zour North power generation 
project, valued at US$ 2 billion--Alghanim said that he was 
hearing that a U.S. firm would be the prime contractor.  In 
addition, Alghanim commented that some 30 to 40 percent of 
the contract would go to non-American suppliers. 
 
   b. the expansion of petroleum production in the north on 
the border with Iraq called Project Kuwait--Alghanim said 
this was very political. He did not elaborate, but given the 
multi-billion dollar estimates, the involvement of many 
Members of Parliament in the petroleum business, and the 
present constitutional restriction on non-Kuwaiti firms 
owning Kuwaiti natural resources such as petroleum, this 
project is attracting a massive amount of local interest. 
Alghanim did mention at this point that American firms ought 
to be able to negotiate with the GOK (i.e., MoE) without 
agents.  Despite being the leader of the Kuwaiti private 
sector and having profited himself from many successful 
agency agreements, even he implied that agents sometimes 
generated problems and were not always the most helpful 
either to their foreign principal or to Kuwait; nevertheless, 
he said smart foreign companies should employ agents to 
handle specific cultural issues, although these same foreign 
companies should have direct and legal access to the GOK. 
 
7. (SBU) The Ambassador shifted to the importance of Kuwaiti 
youth studying in the U.S.--a potentially powerful bridge 
between the two nations.  Alghanim mentioned that his two 
sons had studied in Seattle, and that education in general 
and specific professional training even for a few months 
would be highly beneficial.  He summarized the advantages as: 
 
   a) good training/orientation into any field, and 
 
   b) persuasive introduction to America and its realities. 
 
8. (U) Ambassador presented flyers on an education expo on 
Feb. 16 managed by the Commercial Service with 13 
participating American colleges and universities. 
LEBARON