US embassy cable - 05KUWAIT4643

UNCLAS KUWAIT 004643 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARPI SWALKER AND RSMYTH, EB/FO FOR JSALOOM 
STATE PLEASE PASS TO USTR FOR PBURKHEAD AND JBUNTIN 
STATE PLEASE PASS TO USPTO FOR JNESS AND PFOWLER 
LONDON FOR LTSOU 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, PREL, EFIN, EINV, BEXP, KU 
SUBJECT: GOK STILL GEARING UP FOR ECONOMIC REFORM 
 
 
This cable is sensitive but unclassified; please protect 
accordingly.  Not for Internet distribution. 
 
1.  (SBU) Ambassador met with Advisor to the Prime Minister 
Dr. Yousef Al-Ebraheem on October 26.  Among other issues, 
they discussed the slow pace of Kuwait's economic reform and 
the stalled TIFA process.  Al-Ebraheem acknowledged that the 
GOK carried as much responsibility as did the parliament in 
affecting the changes needed for reform.  He predicted 
progress in privatization and the new tax law by summer 2006. 
 End Summary. 
 
2.  (SBU) On October 26, Ambassador met with Advisor to the 
Prime Minister Dr. Yousef Al-Ebraheem at the Advisor's office 
in the Seif Palace.  Among other issues, they discussed the 
slow pace of Kuwait's economic reform, despite the 
opportunity offered by the TIFA process to move to an 
eventual FTA.  "We have to start somewhere," Al-Ebraheem 
said.  He explained that it wouldn't do to always blame the 
National Assembly membership for dragging its collective 
feet, that the government itself had to take responsibility 
for reform. 
 
3.  (SBU) Al-Ebraheem recounted how he had encouraged 
Minister of Commerce and Industry Abdulla Abdulrahman 
Al-Taweel to have the Council of Ministers establish a reform 
steering committee and second university professors with 
economics and trade experience to that body.  "We need 
progress on GCC matters, with the EU, the FTA with Singapore 
and related things," he observed.  His proposal would have 
the professors on sabbatical for at least a year to provide 
continuity in their economic reform program development work. 
 
4.  (SBU) "We would like to see significant economic reform 
before the end of the year, but that's not realistic," 
Al-Ebraheem complained, saying that "much depends on the 
political process, not just the markets."  He then ticked off 
major areas of reform in which he thought there could be 
progress by summer 2006.  Topping the list was Project 
Kuwait, a multibillion dollar program to double the output of 
Kuwait's northern oil fields to 900,000 barrels/day. 
 
5.  (SBU) He also said a new corporate tax law, that would 
apply a common tax structure to both foreign companies and 
their now-exempt Kuwaiti competitors, could be in place 
before the coming summer.  Next, he stated that the 
government procurement law "which we (in the Council of 
Ministers meeting) discussed last week and sent to Parliament 
with changes," a likely candidate for approval. 
Privatization also was a key Al-Ebraheem concern, and he 
cited the privatizing of Kuwait Airways an important 
objective.  Kuwait's seaports, too, should go to the private 
sector with competition among firms, he said.  Al-Ebraheem 
said that building a new airport, in addition to a major 
overhaul of existing structures, is a necessary step in 
making Kuwait a regional hub for cargo flights. 
 
6.  (SBU) Ambassador concurred in each of Al-Ebraheem's 
points and recommended --in order to move the TIFA process 
along - that Kuwait follow Oman's example and hire competent, 
well-established consultant support in Washington.  One way 
to move the "stalled process" along, he said, would be to 
have the GOK senior economic and trade policy officials visit 
with U.S. counterparts. 
 
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Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
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LEBARON