Cablegate: Kuwait Fund Signs Iraq School Construction

VZCZCXRO4218
PP RUEHDE
DE RUEHKU #4980/01 3371408
ZNR UUUUU ZZH
P 031408Z DEC 05
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 1985
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE PRIORITY
RUEHGB/AMEMBASSY BAGHDAD PRIORITY 0496
RUEHLO/AMEMBASSY LONDON PRIORITY 1105

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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