US embassy cable - 05KUWAIT4980

UNCLAS SECTION 01 OF 02 KUWAIT 004980 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARPI SWALKER, LONDON FOR LTSOU 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, IZ, KU 
SUBJECT: KUWAIT FUND SIGNS IRAQ SCHOOL CONSTRUCTION 
CONTRACT BUT NO PROGRESS ON HEALTH AND POWER SECTOR PROJECTS 
 
REF: A. KUWAIT 4905 
 
     B. KUWAIT 4318 
     C. KUWAIT 3850 
 
1. (SBU) Begin Summary.  During a November 30 meeting with 
Econoff, the Kuwait Fund for Arab Economic Development's 
(KFAED) acting Regional Manager for Arab Countries, Abdullah 
Al-Musaibeeh, confirmed that KFAED signed a $30M contract 
with a Kuwaiti firm to begin school construction in Iraq but 
that the remaining $30M grant for health sector projects  was 
still on hold pending an agreement on specific projects.  He 
added that KFAED's $440M concessional loan offer for power 
sector development was also on hold pending a formal 
appraisal of the ITG-proposed site.  End Summary 
 
2.  (SBU) Following the November 27 visit to Kuwait by the 
Iraqi Planning Minister Barham Saleh (reported in ref A), 
Econoff met with Abdullah Al-Musaibeeh, Acting Regional 
Manager for Arab Countries at KFAED for an update on pending 
GOK assistance ($560M in grants and loans) in support of 
Iraqi health, education, and power sector development 
(reported in reftels). 
 
Progress on $30M School Construction Grant 
------------------------------------------ 
 
3.  (SBU)  Al-Musaibeeh confirmed that a contract had been 
signed last week with a Kuwaiti firm for the $30M GOK grant 
to build approximately 40 schools in Iraq.  Al-Musaibeeh 
provided Econoff with a summary of the agreement:  The 
allocated grant amount is $30M with the Iraqi Ministry of 
Education as the intended beneficiary.  The contractors are 
Pan-Arab (Kuwaiti) and Al-Jarrah (Iraqi), working as part of 
a joint venture and selected from a pool of 20 qualified 
companies that bid on the tender.  The initial $930,171 of 
the grant would fund a design assessment, including terms of 
reference for the project.  Al-Musaibeeh could not confirm an 
official start date for construction but pointed out that the 
total duration, as identified in the contract, is 32.5 
months.  The GOK (via KFAED) would be responsible for 
financing the entire project through the $30M grant. 
 
Agreement Still Pending on Disbursal of Health Grant 
--------------------------------------------- ------- 
 
4.  (SBU) With regard to the remaining $30M grant for health 
sector projects, Al-Musaibeeh explained that an agreement was 
still pending between the GOK and ITG on how best to allocate 
the funds.  Echoing a KFAED refrain, Al-Musaibeeh explained 
that the GOK is not supportive of the ITG request to fund the 
construction of mobile clinics, preferring instead the 
original ITG proposal for a single surgical complex or some 
other similar alternative.  He added that KFAED "is waiting 
to hear from the Iraqi Ministry of Health" on potential 
alternatives and was not aware of any progress on this issue 
resulting from Minister Saleh's visit. 
 
Power Sector Projects Pending Formal Appraisal 
--------------------------------------------- - 
 
5.  (SBU) Al-Musaibeeh noted that as with the discussions on 
health sector assistance, the GOK and ITG had yet to agree on 
the allocation of the $440M concessional loan package.  He 
said KFAED was not prepared to immediately approve the ITG 
request to allocate the full loan amount to a single thermal 
power station in northern Iraq.  He said that the GOK offer 
was on hold pending a formal KFAED appraisal of the proposed 
site and that a three-member KFAED team, comprised of a 
legal, economic and engineering advisors, would have to 
travel to Iraq for at least 10 working days to conduct the 
appraisal.  However, he pointed out that KFAED was unsure how 
to do an appraisal given the current security situation in 
Iraq.  According to Al-Musaibeeh, the ITG has selected 
Siemens as the principal contractor for Iraq power sector 
projects. 
 
6.  (SBU) Al-Musaibeeh also referred to a letter sent 
recently to GOK Prime Minister Al-Sabah from the Iraqi 
Communications Minister requesting the GOK to allocate $96M 
from the $440M loan package as a grant to fund the purchase 
of fiber optic cables proposed by a prominent Kuwaiti company 
(Al-Sultan).  Al-Musaibeeh explained that certain Iraqi 
ministries wrongly considered the $440M loan package a grant. 
 He noted that the request letter has been forwarded to 
Kuwaiti Foreign Minister Dr. Mohammed Al-Sabah for his review 
and that the Council of Ministers (cabinet) would probably 
refuse the ITG Minister's request. 
 
KUWAIT 00004980  002 OF 002 
 
 
 
No GOK Funds Allocated Yet for New $60M Grant 
--------------------------------------------- 
 
7.  (SBU) Al-Musaibeeh explained that the Council of 
Ministers had not yet identified the funds for the additional 
$60M grant announced in June to fund health, education and 
power sector projects in Iraq (refs B and C). 
 
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LEBARON