US embassy cable - 05KUWAIT1883

C O N F I D E N T I A L SECTION 01 OF 03 KUWAIT 001883 
 
SIPDIS 
 
FOR E, AF; STATE PLEASE PASS TO USAID; 
 
E.O. 12958: DECL: 05/08/2015 
TAGS: EAID, EFIN, PINR, KU, Assistance 
SUBJECT: KUWAIT FUND: SPREADING GOODWILL WITH THE OIL MONEY 
 
REF: KUWAIT 0480 
 
Classified By: Ambassador Richard LeBaron for reason 1.4 (d) 
 
1.  (C) Summary/Comment: During a May 4 meeting with newly 
appointed Director General of the Kuwait Fund for Arab 
Economic Development Abdulwahab Al-Bader and Deputy DG for 
Operations and Disbursement Hisham Al-Waqayan, the Ambassador 
thanked the Kuwait Fund for its work in places of need around 
the world and asked that the Fund continue to support 
particular areas of USG and global concern, including Iraq, 
Afghanistan, the Palestinian Authority, Sudan, and the 
countries affected by the December 2004 tsunami.  Both sides 
agreed that better cooperation is needed between the Kuwait 
Fund, with its numerous activities throughout the globe, and 
other assistance bodies, particularly USAID.  Al-Bader said 
that the Kuwait Fund is looking to expand beyond its 
traditional focus on infrastructure into more social sector 
development activities, especially focusing on hospitals and 
schools.  He said that the Fund is holding the $60 million 
for Iraq until it is contacted directly by the relevant ITG 
ministers.  (We learned on 5/7 that those contacts are now 
underway.)  Al-Bader said that Afghanistan will get more from 
the Kuwait Fund once the status of an outstanding loan is 
cleared up. 
 
2.  (C) Comment: The new DG of the Kuwait Fund called for 
greater cooperation between the fund and USAID.  Ambassador 
suggested that Al-Badr should also be in touch with officials 
involved with other U.S. assistance mechanisms, including the 
Millennium Challenge Account.  Al-Bader said that the USAID 
and the Kuwait Fund had consulted regularly in the 1980s, but 
that the habit had faded away.  Al-Bader is a new DG but a 
veteran of the Kuwait Fund.  Embassy recommends that USAID, 
MCA and others interested USG bodies ask him to come to 
Washington for talks.  He expressed an eagerness to do so, 
and a preference for devoting a day or two to bilateral 
talks, rather than trying to catch people on the margins of 
World Bank meetings.  We believe development of a 
relationship with the Kuwait Fund could serve to leverage 
limited U.S. assistance funds.   (End Summary/Comment) 
 
Kuwait Fund: History and Background 
----------------------------------- 
 
3.  (U) The Kuwait Fund for Arab Economic Development (KFAED) 
is the GOK's primary vehicle for providing assistance and aid 
to other countries.  It was founded the same year as Kuwait's 
independence, in 1961, and was originally meant to assist it 
Arab neighbors.  Its mandate was expanded in 1974 to include 
all developing countries.  KFAED's main method of assistance 
is to provide loans on concessionary terms to finance 
development projects that otherwise would not receive 
financing.  (An example of would be a KD 12 million ($41 
million) loan to the Kingdom of Morocco for a highway 
project, at an interest rate of 4% over a loan period of 20 
years, with a 5 year grace period.)  It also provides limited 
assistance through grants, technical assistance, and 
contributions to other development institutions.  To date, 
KFAED has committed over $11.5 billion in loans to 101 
countries through 650 separate projects, has provided $323 
million in grants and technical assistance, and has 
contributed $1.15 billion to other development institutions. 
 
4.  (U) The KFAED is overseen by a Board which includes the 
Foreign Minister as the Board Chairman.  It currently has 
about 375 employees, divided into the Operations, 
Disbursement and Investment Groups.  According to Al-Bader, 
15 percent of the staff are non-Arab, mostly engineers and 
legal and financial analysts.  Working for KFAED means being 
"fully committed," according to Al-Bader, and he and 
Al-Waqayan said that they have some flexibility in salaries 
and benefits and can give "special contracts" to make sure 
they retain the best people.  KFAED has 65 women working in 
professional positions at the organization, but none of them 
work in the Operations Group.  Al-Bader explained that this 
is because the Operations Group requires frequent, on-call 
travel and that most of the women working for KFAED don't 
want to agree to this. 
 
5.  (C) Al-Bader said that KFAED has a "historic" 
relationship with Africa, because it has always been the 
place most in need of project assistance.  He said that KFAED 
does not work with countries that do not approach it with 
"serious proposals," but that political and religious 
differences between Kuwait and any potential recipient 
country would not affect KFAED's loans and assistance to that 
country.  He specifically mentioned North Korea as a loan 
recipient that the GOK "does not agree with politically" but 
could work with on assistance.  KFAED does not have any 
permanent mission or office anywhere outside of Kuwait, 
Al-Bader said, but it does have "one old office" in Bahrain 
that follows up on some long-standing school and hospital 
projects in that country. 
 
6.  (U)  KFAED has over KD 1.7 billion ($5.8 billion) in 
reserves and has its own capital with which to make loans. 
It was originally capitalized by the GOK, but the only 
transfers it receives from the GOK now are when the GOK 
wishes to make a direct government-to-government grant, such 
as in the case with the grants to Iraq.  It has an active 
Investments Department and its yearly income on its 
investments covers all of its loans, according to Al-Bader. 
Most of its investments are outside of Kuwait, Al-Bader said, 
and he described the previous year's investment portfolio 
performance as "beautiful" and this year as "just OK."  (To 
learn more about the Kuwait Fund, see: 
http://www.kuwait-fund.org.) 
 
More Cooperation Needed, "Like We Used To" 
------------------------------------------ 
 
7.  (SBU) Both Al-Bader and Al-Waqayan repeatedly made the 
point that KFAED used to have much more contact with USAID 
and the World Bank throughout the 1980s on development 
projects and wished to renew this cooperation in the future. 
Al-Bader explained that KFAED and USAID used to sit down 
together and "compare notes," but they have not done this in 
years.  "More eye-to-eye contact on aid coordination" is 
needed, Al-Bader said, in order "to not duplicate the work 
and efforts of all parties."  "We don't have the knowledge of 
what USAID is doing in areas in which we're operating," he 
said.  He specifically suggested having direct coordination 
meetings, rather than just getting together on the sidelines 
of World Bank meetings as they used to. 
 
Iraq: $60 Million Available 
--------------------------- 
 
8.  (C) Al-Bader said that KFAED is waiting on the new Iraqi 
Transitional Government (ITG) to finalize its ministerial 
selections and then for the new Education and Health 
Ministers to communicate with KFAED about the $60 million in 
grants promised by the GOK (reftel).  The Ambassador 
explained that the USG was working with the Provincial 
Councils directly on aid and assistance and urged KFAED and 
the GOK to coordinate as much as possible with other 
international aid and reconstruction efforts for Iraq. 
Al-Waqayan said that KFAED was "pleased to see the UN back in 
Iraq," and that KFAED "can work with them."  Al-Bader added 
that he was "intrigued by the UN's work in Iraq through 
Amman" and wanted to understand more about such an operation. 
 When asked if there would be further grants to Iraq beyond 
the $60 million, Al-Bader said that "it would be hard to say" 
but that KFAED may offer loans if needed.  (Note: The number 
two at the Foreign Ministry told the Ambassador on May 7 that 
the Iraqis have now sent a communication to the GOK to get 
the ball rolling on use of the funds mentioned above. 
Embassy will follow up.) 
 
Afghanistan: New Loans Wait For Resolution Of Old Debts 
--------------------------------------------- ---------- 
 
9.  (C) Al-Bader said that KFAED was willing to provide new 
concessionary loans to Afghanistan but that some outstanding 
loans from projects dating back to the 1980s needed to be 
resolved first.  He specifically mentioned $15 million from 
an outstanding loan for a sugar plant project, but noted that 
the current Government of Afghanistan has no records or 
knowledge about the project.  KFAED is currently 
administering two grants for road projects in Afghanistan. 
Al-Waqayan said that he had recently visited Kabul for the 
first time in 20 years and hoped that KFAED could resolve the 
outstanding loans and help with Afghanistan's "many needs." 
 
Sudan: "You Can Feel The Hope For Change" 
----------------------------------------- 
 
10.  (SBU) Al-Bader said that he has traveled regularly to 
Sudan, "almost five times a year for the past 20 years," to 
check on loans and projects.  He had not seen any changes at 
all in the past 20 years, he explained, but on his most 
recent trip this year he said that he had seen some changes. 
"You can feel movement and a hope for change," he said. 
 
Palestinian Authority: "It's Up To The GOK" 
------------------------------------------- 
 
11.  (C) The Ambassador noted what a critical time this was 
for support of the Palestinian Authority and said that the 
USG is encouraging all of our friends to support the 
financial requirements of the PA.  Al-Bader said that KFAED 
supervises two grants given by the GOK to the PA, but does 
not deal with the PA directly.  Instead, KFAED works with the 
World Bank, the Arab Fund and other international bodies. 
Al-Bader said that KFAED may be given more money in the 
future to administer as grants for the PA, but that this was 
a "decision of the GOK."  (Note: The MFA appears to be the 
check-cutting authority for aid to the PA; the last tranche 
was deposited by the GOK in a PA bank account in Cairo.) 
 
Tsunami Relief For Three Countries 
 
SIPDIS 
---------------------------------- 
 
12.  (SBU) When asked about reconstruction assistance for the 
countries affected by the December 2004 tsunami, Al-Bader 
said that KFAED had been allocated money from the GOK 
"outside of the normal flows of aid and loans" to the region. 
 He said that KFAED was specifically working with Indonesia, 
the Maldives and Sri Lanka, but was waiting for officials 
from the three countries to identify specific projects that 
could be funded by KFAED. 
 
New Directions: More Social Sector Development 
--------------------------------------------- - 
 
13.  (SBU) Al-Bader said that he was going to start working 
on KFAED's five-year plan soon and that the organization was 
looking to expand its work beyond basic infrastructure 
development to more social sector development.  Currently, 
social sector development accounts for only 10% of project 
loans; Al-Bader said he hoped to raise this to around 20%. 
He specifically mentioned wanting to help build more 
hospitals and schools, which would provide a highly-visible 
"before and after" contrast.  KFAED has started social sector 
development projects in Egypt and Lebanon and will soon 
expand these activities to Africa.  Al-Bader expressed 
concerns over the sustainability of certain projects, noting 
that sustainability was always a problem in any aid activity. 
 
 
Bio Notes 
--------- 
 
14.  (SBU) Abdulwahab Al-Bader was born in 1955, is married, 
and has at least two children.  He has not traveled to the 
United States in a few years but will likely travel there 
more frequently because of his new position.  He has worked 
at the Kuwait Fund for 27 years and served as Deputy Director 
General of KFAED from 1986 until his appointment in May 2005. 
 He has a BA in Economics from Whittier College (California), 
and speaks excellent English. 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON