US embassy cable - 05KUWAIT1373

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001373 
 
SIPDIS 
 
STATE FOR INR/B 
 
E.O. 12958: DECL: 04/06/2015 
TAGS: ECON, EFIN, PINR, KU, Banking, Ministers 
SUBJECT: KUWAIT FINANCIAL UPDATE: NEW FINANCE MINISTER, NEW 
STOCK EXCHANGE RECORDS, AND NEW ISLAMIC BANKS 
 
REF: 2004 KUWAIT 3748 
 
Classified By: Economic Counselor Stephen Carrig for reason 1.4 (d) 
 
1.  (U) Summary:  On April 4, the GOK officially appointed 
Kuwait Fund Director General Bader Al-Humaidhi as the new 
Minister of Finance, replacing Mahmoud Al-Nouri who had 
resigned for health reasons.  On April 3, the Kuwait Stock 
Exchange broke the 8,000 point barrier for the first time in 
its history, closing at 8025.  Two new Islamic banks continue 
to make preparations to enter the Kuwaiti market - the newly 
established Bubyan Islamic Bank, which is prepared to 
commence operations in September 2005, and the Kuwait Real 
Estate Bank, which was supposed to have converted itself to 
an Islamic bank by March 31, but was just given a four-month 
extension to finish the conversion process.  End Summary. 
 
Kuwait Fund DG Named as New Finance Minister 
-------------------------------------------- 
 
2.  (U) On April 4, finally accepting the resignation of 
Mahmoud Al-Nouri from the position of Finance Minister one 
year after he offered it, the Amir appointed Kuwait Fund for 
Arab Economic Development (KFAED) Director General Bader 
Mishari Al-Humaidhi as the new Finance Minister.  Al-Nouri, 
while remaining engaged on a number of important issues (Ref 
A), had been plagued by unspecified health problems and 
narrowly survived a no-confidence vote in the National 
Assembly in March 2004.  The Finance Minister is responsible 
for managing a budget which has had surpluses of close to $10 
billion for the last six fiscal years, and is also ultimately 
responsible for a number of organizations which fall under 
the Ministry's domain, including the Customs Agency and the 
Kuwait Investment Authority. 
 
3.  (C) At a March 22 dinner, the brother of Bader 
Al-Humaidhi, Hamad Al-Humaidhi, told Pol Officer that his 
brother would not confirm (even to him) speculation by local 
dailies that he would be named the next Minister of Finance. 
Hamad said Bader had previously expressed his disinterest in 
being appointed a Minister, but he said he would accept the 
position if the Amir or Prime Minister Shaykh Sabah were to 
ask him to. 
 
4.  (U) BIO NOTE: Bader Mishari Al-Humaidhi was born in 1948 
and is married.  He received a BA in Economics from Kuwait 
University and also studied at the University of Southern 
California.  He speaks English fluently.  He was appointed as 
Director General of KFAED in 1986.  He previously held a 
variety of positions at KFAED.  He currently serves on the 
Boards of a number of investment, developmental and 
educational organizations.  The Al-Humaidhi family is one of 
the oldest merchant families in Kuwait. 
 
Stock Exchange Breaks 8,000 Barrier, Keeps Climbing 
--------------------------------------------- ------ 
 
5.  (U) On April 3, the Kuwait Stock Exchange (KSE) broke the 
8,000 point barrier for the first time in its history, 
closing the day at 8,025.  This comes less than a month after 
the KSE broke the 7,000 point for the first time on March 8. 
The recent gains in the KSE have been attributed, publicly in 
the business press and in the rumor mill, to multi-billion 
dollar U.S. military contracts recently won by the Public 
Warehousing Company (PWC), which most stock traders see as 
having a ripple effect throughout the private sector.  Jassem 
Al-Saadoun, head of Al-Shall Economic Consultants, publicly 
described the skyrocketing stock market as "not justified" 
and added that "it appears there has been plenty of 
speculative trading." 
 
New Islamic Banks Entering the Market 
------------------------------------- 
 
5.  (U) As the Islamic banking market in Kuwait continues to 
grow, two new Islamic banks recently provided additional 
information on their operational plans.  April 4 newspapers 
reported that the newly established Bubyan Islamic Bank would 
open four branches in Kuwait by September 2005, and that the 
bank was in the process of finalizing its management 
structure, strategies and policies.  Kuwait Real Estate Bank 
applied to the Central Bank in March 2004 to convert itself 
to an Islamic banking institution and was given a year to do 
so.  On March 27, the bank announced that it had not 
completed the conversion process and had been given a 
four-month extension by the Central Bank.  The bank will 
change its name to Kuwait International Bank, and has asked 
all of its customers to agree to change their outstanding 
loans from interest-bearing to Sharia-compliant instruments. 
 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON