US embassy cable - 05CAIRO5935

C O N F I D E N T I A L CAIRO 005935 
 
SIPDIS 
 
STATE FOR NEA/ELA, NEA/RA, AND EB/IDF 
TREASURY FOR MILLS/NUGENT/PETERS 
 
E.O. 12958: DECL: 08/02/2015 
TAGS: EAID, ECON, EFIN, EINV, EG 
SUBJECT: NEA SENIOR ADVISOR MALLORY MEETING WITH EGYPTIAN 
MINISTER OF INVESTMENT 
 
REF: CAIRO 5083 
 
Classified by A/DCM Michael Corbin for reasons 1.4 (b) and 
(d). 
 
1.  (SBU) NEA Senior Advisor King Mallory and private sector 
consultant Ahmed Dabbous met on July 28 with Egyptian 
Minister of Investment Mahmoud Mohieldin.  Mohieldin was 
accompanied by Mohamed Atallah, Vice Chairman of the General 
Authority for Free Zones and Investment (GAFI), and the Hani 
Sarie-Eldin, Chairman of the Capital Markets Authority.  The 
discussion focused on the draft MOU to create the Fund for 
the Future (reftel), which will be signed at the Forum for 
the Future meeting in Bahrain in November. 
 
2.  (C) Mohieldin had only a few suggestions for changes to 
the draft MOU, including the following: 
 
  A) An accelerated time table for making contributions to 
the Fund: 
      -     60% by 6/06 (vice 20% in draft); 
      -     80% by 6/07 (vice 60% in draft); 
      -     100% by 6/08 (same as draft). 
 
Another alternative would be to make contributions in two 
tranches rather than three, but Mohieldin did not give 
suggested percentages or a timetable for this alternative. 
Mallory and Dabbous explained that the U.S. contribution 
would be coming from MEPI funds, and Congress would authorize 
contributions and appropriate them annually, based on the 
success of the Fund in meeting its objectives.  Therefore, it 
might not be possible to accelerate the U.S. contribution as 
the GOE had suggested. 
 
B) Greater participation for partner countries (i.e, Egypt 
and Morocco) in the investment process.  Mohieldin questioned 
how involved the GOE could become in management of the Fund, 
suggesting that the GOE would like a greater say in 
decisionmaking than what was envisioned in the draft MOU. 
Mallory and Dabbous explained that the partner countries 
would be able to suggest private individuals to be named to 
the Board of Directors by POTUS.  The Board would then name 
the Fund's management team, and would be directly involved in 
decision making regarding funding proposals/projects.  This 
clarification seemed to address Mohieldin's concerns. 
 
C)  The GOE would like to make its contribution to the Fund 
in local currency, not in USDs.  The main concern seemed to 
be the greater exchange risk involved in making contributions 
to the Fund in USDs.  Mallory and Dabbous explained that 
partner countries could make contributions to the Fund in 
their local currencies, and that the Fund would bear the 
exchange risk involved in any investments.  The Fund's 
management team would, however, have discretion to change 
monies in the Fund account into various currencies, in order 
to minimize the exchange risk. 
 
D)  The GOE wanted to direct the Fund toward medium sized 
enterprises, rather than small and medium sized enterprises. 
Small enterprises are serviced by a number of other financing 
programs, so the GOE would like to focus on medium size 
projects.  Mallory and Dabbous explained that funding small 
enterprises could not be eliminated from the Fund's 
objectives entirely, as Morocco (or any future partner 
countries) might want to use the Fund to finance small 
enterprises.  If Egypt independently chose to finance mainly 
medium sized projects, that would be its prerogative.  The 
GOE would be able to direct financing toward medium sized 
enterprises through its representatives on the Board of 
Directors.  This also seemed to address Mohieldin's concerns. 
 
 
3.  (C) Mallory and Dabbous stated that they would redraft 
the MOU, taking into consideration the suggestions received 
from the GOE and the GOM.  The redraft would then be 
circulated again for any additional comments.  Mohieldin said 
his staff would prepare a memo for Prime Minister Nazif with 
the details of the Fund.  Nazif has already agreed in 
principle to Egypt's participation in the Fund. 
 
 
Visit Embassy Cairo's Classified Website: 
http://www.state.sgov.gov/p/nea/cairo 
 
You can also access this site through the 
State Department's Classified SIPRNET website. 
 
JONES