US embassy cable - 05MANAMA1385

UNCLAS SECTION 01 OF 03 MANAMA 001385 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR E/SNEWHOUSE, EB/IFD LGREENWOOD, EB/OIA PBROWN, 
NEA/PI FOR BTHORKELSON, NEA/ARPI 
COMMERCE FOR ITA/ONE TSAMS 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, BA, OECD 
SUBJECT: OECD-MENA INVESTMENT PROGRAM: BAHRAIN MEETING OF 
WORKING GROUPS AND PREPARATION FOR NOVEMBER MINISTERIAL 
 
 
Sensitive but Unclassified;  Please protect accordingly.  Not 
for internet distribution. 
 
1. (SBU) Summary: Working Groups 1 (Open and Transparent 
Investment Policies - WG 1) and 2 (Investment Promotion 
Agencies and Business Associations as Drivers of Reform - WG 
2) of the OECD-MENA Investment initiative met in Bahrain 
September 12-14 to review and approve their contributions to 
a stock-taking report on the investment climate in MENA 
countries and recommendations for priority areas of reform to 
improve the investment climate.  The other three working 
groups have or will meet to review their progress and 
recommendations before the October 3 meeting of the Steering 
Group in Istanbul.  Participants also reviewed the draft 
Declaration for adoption at the Ministerial meeting to be 
hosted by Jordan on November 17.  The discussion will provide 
the basis for a draft to be circulated to participants. It is 
hoped the Steering Group can agree on a final text to be sent 
to participants well in advance of the Ministerial. 
 
2. (SBU) In a meeting with the US, UK, Japan and OECD 
representatives, Bahrain's Minister of Industry and Commerce 
Dr. Hassan Fakhro agreed to use his chairmanship of an 
upcoming meeting of GCC Industry and Commerce ministers to 
promote the OECD-MENA initiative.  Both World Bank and 
Multilateral Investment Guarantee Agency (MIGA) officials 
participated actively and constructively in the discussions. 
Participants welcomed Iraq,s first-time attendance at a 
OECD-MENA event.  End Summary. 
 
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Participation 
------------- 
 
3. (SBU) Bahrain, Egypt, Iraq, Jordan, Lebanon, Morocco, 
Oman, the Palestinian Authority, Qatar, Saudi Arabia, Syria, 
Tunisia, UAE/Dubai, and Yemen attended from the region.  An 
array of agencies (investment promotion agencies, investment, 
commerce, development and finance ministries, and tax 
agencies) were represented.  Officials representing the UK, 
Japan, Switzerland, France and the US attended, including Wes 
Scholz and John Finn (State Department Investment Office) and 
Thomas Sams (Commerce Near East Office).  The World Bank, 
MIGA, UNIDO and Arab Council for Economic Unity also 
participated. 
 
----------------------- 
Ministerial Declaration 
----------------------- 
 
4. (SBU) As a result of the discussion of the draft 
ministerial declaration for the November 17 meeting in 
Jordan, it is likely that the revised text will: 
 
- note the challenges the region faces and the need for 
immediate action; 
 
- welcome the results of the working groups; 
 
- call for MENA countries that have not already done so 
(Egypt and Bahrain have) to organize their country economic 
teams to draw on the recommendations in their development of 
specific national reform agendas with specific targets for 
action within the next 12 months; and 
 
- arrange another ministerial meeting to review progress at 
the end of that period. 
 
A number of MENA countries including Egypt, Morocco and the 
Palestinian Authority stressed the importance of a strong 
statement of support by OECD countries in the declaration. 
It is possible that a statement of support may be developed 
separate from the ministerial declaration, giving OECD 
members firmer control of its content.  It might also provide 
an opportunity for other institutions (e.g. World Bank, IFC) 
to pledge their support. 
 
5. (SBU) Participants generally agreed that the first draft 
of the ministerial declaration was too long and detailed, 
particularly in listing priorities for reform.  Many agreed 
with the World Bank and U.S. interventions suggesting that a 
few key critical areas for action needed to be emphasized. 
In addition, rather than annexing the detailed 
recommendations of all the working groups, the declaration 
should welcome the work of the working groups, note 
approvingly their recommendations, and pledge MENA countries 
to draw on them in identifying their individual priorities 
for action in developing their national plans for the next 
year.  This responded to the concerns of a number of MENA 
country interventions noting that individual MENA country 
representatives at the ministerial would not be able to 
commit their governments to detailed recommendations that 
related to responsibilities of other ministries. 
 
--------------------------------------------- - 
WG 1: Open and Transparent Investment Policies 
--------------------------------------------- - 
 
6. (SBU) Members agreed to update information contained in 
the report on Investment Climate and Regulation of 
International Investment in MENA Countries as soon as 
possible.  Members asked that three informal task forces be 
established to look into foreign direct investment screening, 
real estate acquisition, and administrative simplification 
and transparency.  In order to increase their understanding 
of the provisions of International Investment Agreements 
(IIAs), the Working Group members agreed to exchange 
information with OECD experts on IIAs, draft a source book 
with reference material on investment treaties, and explore 
existing training programs on investment treaties.  Following 
a discussion of the report drafted by the Task Force on 
Business Ethics and Anti-Bribery Policies in Selected MENA 
Countries, Working Group members encouraged the Task Force to 
continue its efforts to develop and implement the report's 
action plan and to increase participation by both the private 
sector and civil society.  The Task Force on FDI Statistics 
presented its report, which is based on input from selected 
countries.  The Working Group asked that the Task Force 
continue its work focusing on all MENA countries, with 
particular attention on data collection, dissemination, and 
methodology. 
 
----------------------------------------- 
WG 2:  Driving Forces for Economic Reform 
----------------------------------------- 
 
7. (SBU) The OECD presented the brochure it drafted on the 
OECD-MENA Investment Initiative, noting that it would be used 
in OECD and MENA countries to explain the initiative and 
not/not to promote investment in the region.  (MENA 
representatives sought a second brochure to address the 
latter, which the OECD agreed to consider.)  The OECD also 
presented its website for the Initiative.  Working Group 
members agreed to organize workshops on the role of 
investment promotion agencies (IPAs) as investment policy 
advocates and as one-stop shops.  They agreed on the need for 
more information on MENA IPAs.  Members agreed with the 
report from the Task Force on Investment Incentives, but 
sought more information on Free Trade Zones (FTZs) and 
Special Economic Zones (SEZs).  In particular, they agreed to 
undertake a self-assessment of FTZ and SEZ incentives and to 
establish a methodology to evaluate those incentives.  They 
also agreed to evaluate non-tax incentives.  Finally, Working 
Group members discussed the proposed Investor of the Year 
awards (that would be announced at the November Investment 
Ministerial) and a Business Day preceding the Ministerial. 
They urged that the Business Day be carefully planned, so as 
to include a wide variety of MENA-based business groups. 
 
8. (SBU) Following the WG 2 session, a representative from 
the Turkish Federation of Chambers of Commerce gave a 
presentation on the Federation's plans for the development of 
the Erez Industrial Estate in Gaza, in consultation with 
Israeli and Palestinian officials and James Wolfensen. 
9. (SBU) OECD representatives from the US, the UK, and Japan 
met with Minister of Industry and Commerce Dr. Hassan Fakhro 
to brief him on the OECD-MENA investment initiative. 
Minister Fakhro agreed to use his chairmanship of an upcoming 
meeting of GCC Industry and Commerce ministers to promote the 
initiative. 
 
 
MONROE