US embassy cable - 03KUWAIT2235

C O N F I D E N T I A L KUWAIT 002235 
 
SIPDIS 
 
STATE FOR NEA AND EB 
STATE PASS TO USTR FOR DOUG BELL 
 
E.O. 12958: DECL: 05/19/2013 
TAGS: ETRD, ECON, EINV, KU 
SUBJECT: MIDDLE EAST TRADE INITIATIVE 
 
REF: STATE 135263 
 
Classified By: Ambassador Richard Jones for reasons 1.5 (B) and (D). 
 
1.(C)  Embassy Kuwait will work enthusiastically to advance 
the President's new Middle East Trade Initiative as outlined 
in reftel. We noted two particular themes in the message: a) 
countries will need to do some heavy lifting to benefit from 
the initiative; and b) the Administration understands the 
initiative is a long-term commitment, which will take years 
to fully achieve. 
 
2.(C) Kuwaiti businessmen, who have long lamented the 
government's dominance of the local economy, often echo the 
complaints of GOK technocrats charged with developing and 
implementing economic reforms.  We see Kuwait as a country 
fully aware of its need for reform, fully aware of the kinds 
of reforms needed, and fully capable of making the needed 
reforms.  The challenge here has been, and continues to be, 
an unfortunate lack of political leadership; a lack of a 
vision for the transformation of the Kuwaiti economy.  While 
the new Middle East Trade Initiative will likely receive a 
warm welcome from Kuwaiti leaders, it will take sustained 
prodding to overcome the current inertia in GOK policy 
making.  Characteristically, Embassy has received no/no 
inquiries from GOK interlocutors about the initiative since 
the President's May 9 announcement. 
 
What's Attractive/What's Problematic 
------------------------------------ 
 
3.(C) Kuwait will find the idea of closer ties to the U.S. 
attractive, given concerns that their special relationship 
with the U.S. will fade as Iraq grows in importance. 
Further, the GOK has long been anxious to conclude a 
Bilateral Investment Treaty with the U.S. (their main motive, 
however, is preferential tax treatment for their financial 
investments in the U.S., and they have thus far been 
unwilling to relax restrictions on FDI into Kuwait).  The GOK 
will also welcome the offer of technical assistance to build 
trade capabilities, particularly on WTO issues. 
 
4.(C) Predictably, the suggestion of including Israel in the 
FTA will be a significant hurdle for Kuwait.  However, full 
settlement of Israeli-Palestinian issues would help overcome 
this.  The GOK will likely have few other reservations about 
the Initiative. 
 
How Will Kuwait Participate 
--------------------------- 
 
5.(C) If past experience is a guide, we believe the GOK will 
support the concept of the Initiative and applaud its 
introduction.  Mid- and senior-level officials and many 
Kuwaiti businessmen will welcome U.S. pressure on the GOK to 
finally implement deep and broad reforms, and urge us to do 
even more.  However, unless the senior leadership of Kuwait 
embraces the initiative and gives it vocal support, Ministers 
will take only half-steps, while looking over their shoulders 
at a congenitally hostile National Assembly ready to punish 
any misstep. 
 
Comment 
------- 
 
6.(C) The GOK has preached reform since before Iraq's 
invasion of the country, but frustratingly little has been 
done since then.  This argues for even greater U.S. pressure 
on Kuwait than on other states in the region to reform and to 
do it quickly.  This initiative, with its long-term approach 
and an expectation for countries to really do something to 
take advantage of it, might actually bear some fruit provided 
we spend enough time in the garden. 
JONES