US embassy cable - 03KUWAIT1056

C O N F I D E N T I A L SECTION 01 OF 02 KUWAIT 001056 
 
SIPDIS 
 
STATE FOR NEA/ARP 
USDOC FOR 3131/USFCS/OIO/ANESA 
USDOC FOR 4520/MAC/AME 
 
E.O. 12958: DECL: 03/22/2013 
TAGS: ETRD, EINV, IZ, KU 
SUBJECT: SADDAM,S DEFEAT COULD BE A GOLDEN OPPORTUNITY FOR 
KUWAIT,S BUSINESSMEN--IF THEY SEIZE THE MOMENT 
 
 
Classified By: Ambassador Richard H. Jones for reasons 1.5 (d) 
 
1. (C) Summary:  Long before the fighting began on Kuwait's 
northern border, Kuwaiti firms were bombarding the Embassy 
with requests to do business with U.S. and coalition forces 
here, and expressing commercial interests in a post-Saddam 
Iraq.  Kuwaiti businessmen see Kuwait as the logical 
jumping-off point for any firm wishing to profit from the 
reconstruction of Iraq, but as yet seem to have few solid 
plans to enter the Iraqi market themselves, or attract 
foreign partners to do so.  What's more, few Kuwaiti 
businessmen or officials see the need for reform in Kuwait, 
either of the country's decidedly xenophobic investment laws, 
or of a business culture that rewards commercial families 
with connections, rather than entrepreneurs with novel ideas. 
 As shown by the pre-war success of smaller companies 
vis--vis traditional Kuwaiti business families,  Kuwaitis 
will likely have to reinvent their approach to business, or 
at least start planning, if they hope to have a piece of the 
Iraq reconstruction pie.  End Summary. 
 
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The Early Bird Needs No Wasta 
----------------------------- 
 
2. (U) In the last few weeks building up to the war now being 
fought in Iraq, post's Commercial and Economic sections 
received hundreds of requests from Kuwaiti companies hoping 
to do business with the U.S. and Allied forces being 
pre-positioned in Kuwait.  Spurred by the news that some 
among them were making fortunes supplying a rapidly expanding 
number of U.S. forces, Kuwaiti companies began a barrage of 
faxes and phone calls to the Embassy (Post's FCS office 
received 40-50 requests per day, which were passed to the 
Army's Directorate of Contracting, KU, at Camp Doha).  In 
addition, the Acting Commercial Officer (A/CO) received 
requests through colleagues in almost every section of the 
embassy, who had been contacted by their Kuwaiti friends and 
neighbors seeking an entree into the military market. 
 
3. (C) Alongside these requests came complaints.  Large 
commercial families with wide-ranging interests in Kuwait 
said they were being prevented from from dealing directly 
with the U.S. military, and protested that 'commercial 
agents,' many of them third-country nationals, were profiting 
greatly from their roles as middlemen to the U.S. military. 
(Comment: Although not specifically stated, it was clear that 
the largest of these commercial families were angry they 
apppeared to be missing an opportunity to sell to the U.S. 
military.  Worse, the fact that third-country nationals were 
profiting from quick action and adaptability was an obvious 
irritant to Kuwaitis used to getting their way in domestic 
business dealings.  End Comment.) 
 
----------------- 
Where's the Plan? 
----------------- 
 
4. (C) During the pre-war period, A/CO also visited Kuwaiti 
businesses and commercial organizations to hear their plans 
for post-war involvement in Iraq.  Some businessmen were 
clear about their intentions.  Well-known businessman Saud 
al-Arfaj, for example, said he was interested in partnering 
with U.S. companies here in Kuwait to do business in Iraq. 
Others, such as the al-Ghanim family, are known to be 
stockpiling goods in Kuwait's Free Trade Zone for eventual 
sale to Iraq.  But even while expressing their belief that 
Kuwait would undoubtably play a vital role in Iraq's 
reconstruction, few could explain with any coherence what 
their specific plan was for entry into the Iraqi market. 
 
5. (C) Most telling of all was a visit to the Director 
General of Kuwait's Chamber of Commerce and Industry (KCCI), 
Mr. Ahmed al-Haroun.  Mr. al-Haroun said KCCI did not have 
any specific plans for involvement in Iraq, although it 
expected to be involved there commercially.  Further, he 
said, Kuwaiti companies wishing to partner with 
multinationals to do business in Iraq (as in the case of Mr. 
al-Arfaj) would find plenty already in the domestic market; 
after all, Mr. al-Haroun said, Kuwait's foreign investment 
laws are "perfect." 
 
6. (C) Comment:  When combined, al-Haroun's statements, a 
lack of planning by individual businessmen and Kuwaiti 
complaints during the pre-war period seem to paint a picture 
of a business sector ill-prepared to operate outside the 
protective cocoon of a Kuwaiti business environment, where 
personal influence, or wasta, is the modus operandi.  Even if 
Kuwaiti businesses hoped to partner with U.S. companies, 
Kuwait's antiquated business laws are a direct and often 
insurmountable obstacle to companies looking to enter the 
Kuwaiti market, or simply make the country their regional 
base. (Foreign companies are required to have a Kuwaiti 
majority stakeholder, on top of being taxed at 55%).  If 
Kuwaitis are serious about entering a liberated Iraqi market, 
they will need to develop a serious plan to do so.  End 
Comment. 
JONES