Cablegate: United Arab Emirates Investments Target Tunisia

VZCZCXRO9154
PP RUEHDE RUEHTRO
DE RUEHTU #2753/01 3190703
ZNR UUUUU ZZH
P 150703Z NOV 06
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2210
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0813
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7342
RUEHLO/AMEMBASSY LONDON PRIORITY 1209
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0801
RUEHFR/AMEMBASSY PARIS PRIORITY 1662
RUEHRB/AMEMBASSY RABAT PRIORITY 8263
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0003
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4015
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUEHDE/AMCONSUL DUBAI 0126

UNCLAS SECTION 01 OF 03 TUNIS 002753

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG (HARRIS) AND EB/CBA
USDOC FOR ITA/MAC/ONE (ROTH), AND CLDP (TEJTEL)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: EINV ECON ETRD TS

SUBJECT: United Arab Emirates Investments Target Tunisia

REF: (a) TUNIS 2488; (b) TUNIS 0629; (c) TUNIS 2598;

1. SUMMARY: In a period of less than 12 months, the United Arab
Emirates (UAE) has become the biggest single foreign investor in
Tunisia, surpassing France, which, excluding energy, has been the
largest investor in Tunisia over the last five years. Comment:
While UAE investors have been active in Tunisia for a number of
years, the oil boom has meant that they have billions to spend --
and they have decided to spend a good deal of it in Tunisia. End
comment. The recent sale of 35 percent of Tunisie Telecom,
Tunisia's national telecommunications agency, to a Dubai Holding
consortium for USD 2.25 billion, set off a frenzy of planned
investment amounting to over USD 20 billion. The bulk of the
investment targets prime real estate in the city of Tunis and its
immediate suburbs. Sale of this state-owned property was not opened
to public tender and a U.S. company has claimed it was barred from
making an offer for one of the development sites, ultimately sold to
a Dubai Holding company for a reported USD 15 billion. END SUMMARY.

2. BACKGROUND: Dubai Holding is controlled by Sheikh Mohammed Bin
Rashid Al Maktoum, the current vice president of the UAE and Prime
Minister and ruler of Dubai. In May 2006 his wife, Princess Haya
Bint Al Hussein, paid a visit to Tunisia and was widely covered in
the media in the company of President Ben Ali's wife. The CEO of
Dubai Holding, Mr. Mohammed Al Gergawi, also visited Tunisia earlier
this year and announced that a fund of USD 300 million would be
available for investment in the share capital of Tunisian companies
or on the Tunisian Stock Exchange. Gergawi is also chairman of
another member of the group, Dubai International Capital. Several
other Emirati groups have also launched projects in Tunisia.
Meanwhile, Emirates Airlines has just started a five times weekly
service between Dubai and Tunis (Ref A). END BACKGROUND.

3. Known and planned investments in Tunisia by various Emirati
groups include:

-- TUNISIE TELECOM

A consortium of TECOM Investments and Dubai Investment Group
(TECOM-DIG) won the contract for the sale of 35 percent of the
capital of Tunisie Telecom (Ref B).
TECOM Investments is a subsidiary of Dubai Holding. Dubai
Investment Group (DIG - formerly called The Investment Office - is
the global financial investor of Dubai Holding. DIG is also
sometimes referred to as the Dubai Investors Group.

--DEVELOPMENT OF THE SOUTHERN PART OF THE LAKE OF TUNIS (KNOWN AS
THE LAC SUD PROJECT)

Dubai Holding's newly formed Sama Dubai has launched the USD15
billion Lac Sud project which will cover 683 hectares and contain
commercial and residential centers housing up to 120,000
inhabitants. Plans include a 105-storey tower, three-level
overpasses, a football stadium, and the renovation of the old port
of Tunis into a marina. The local headquarters of Dubai Holding has
been built adjacent to the old port and was expected to be
inaugurated on November 7, not coincidentally the anniversary of
President Ben Ali's accession to power (in 1987). Construction of
the building took only 52 days. There had been US interest in the
Lac Sud project but a US company was not allowed to present its
offer since the project was not opened up to tender.

--DEVELOPMENT OF THE SPORTS CITY ON THE NORTHERN PART OF THE LAKE OF
TUNIS (KNOWN AS LAC NORD SPORTS CITY)

The USD 5 billion Sports City will be built on the Lac Nord by the
Emirati Al Bukhatir group (Ref C). The group is one of the major
investors in Dubai Sports City which is being developed by Dubai
Holding. It will cover 250 hectares on the north of the lake. Work
is due to start in 2007 and is expected to take five/six years. The
project will include nine sports academies covering 36.5 hectares,
golf courses and a 125 hectare residential zone. Maghreb
Confidential has also reported that "Dubai Holding Co., whose

SIPDIS
Tunisian partner is the Trabelsi group, is in advanced talks to

TUNIS 00002753 002 OF 003

acquire a huge building plot on the banks of the Lake North in
Tunis." The Trabelsi group is headed by Belhassen Trabelsi, brother
of Leila Ben Ali, wife of President Ben Ali.

-- EL QUOSSOUR (LES PALAIS) TOURISM PROJECT

This USD 1.88 billion project is being developed by Dubai-based real
estate group EMAAR. It will cover 442 hectares and includes 4,000
luxury residences, six hotels, a yacht club, a marina, and a golf
course. The capital of the group is divided equally between the
Emirate of Dubai, private investors, and stock exchange investors.
Borj El Arab was developed by this company.

-- MEDIALEADER

A company known as Medialeader, based in Paris and Dubai, plans to
start an economics magazine "Saneou al Hadath" (Event Maker) in
Tunisia. It will be edited in Dubai, with contributions from
correspondents in Tunisia and 60 percent local Tunisian content.
Medialeader also produces another magazine entitled "Arabies
Trends". The local partner is BienVu, an advertising company that
is part of a group belonging to Mrs. Ben Ali's niece, Lilia Nacef.
Medialeader has said it has plans "to increase its association with
other parts of the media."

-- AL THANI GROUP

Mr. Abdulla Saeed Al Thani, head of the Al Thani Group, recently
visited Tunisia and said the group intends to reinforce existing
cooperation, which already includes the choice of Tunisia as the
African regional centre for the Al Thani Petroleum group
(operational since the beginning of 2005). The group also wants to
invest in tourism, agriculture, and maritime transport services.

-- KARTHAGO AIRLINES

Dubai Investment Group (DIG) has recently increased to 20 percent
its share in Karthago Airlines, the airline owned by Belhassen
Trabelsi, brother-in-law of President Ben Ali(Ref C).

-- SOMOCER

This Tunisian company manufacturers ceramic tiles and bathroom
fittings and has had severe financial difficulties in recent years.
Dubai Investment Group (DIG) has purchased a 12 percent share in the
company, which belongs to the Abdennadher family. Fethi
Abdennadher, formerly a "Counselor" at the Palace and now President
of the Constitutional Council (Conseil Constitutionnel) is a member
of this family.

-- SOTRAPIL

A majority GOT-owned company that installs and operates hydrocarbon
transport pipelines. Emirates International Investment Company owns
more than a 5 percent share of this company.

--ELECTROSTAR LG

Electrostar LG is a Tunisian company that assembles and distributes
LG Products. Emirates International Investment Company owns about a
7 percent share in Electrostar LG.

-- SIAME

Dubai Investment Group (DIG) owns approximately 5 percent of the
capital of SIAME, which manufactures components for low-tension
power networks.

-- BANQUE DE TUNISIE ET DES EMIRATS (BTE)

Established in 1982 as an investment bank, the BTE became a
commercial bank when new Tunisian legislation amended the statutes
of financial institutions in 2001. BTE can now offer the whole
range of financial services. The capital is approximately USD 70
million. The chairman of the bank is an Emirati and the CEO is

TUNIS 00002753 003 OF 003

Tunisian. Each country has six board members.

--DAMAC HOLDING

On November 3 the Tunisian press reported a meeting between
President Ben Ali and the CEO of Dubai's DAMAC Holding group,
stating that "certain projects that the group proposes to carry out
were presented during the meeting." No other details were given.

4. (SBU) COMMENT: Most press commentaries on the upsurge in Emirati
investments are keen to point out that at last Tunisia is being
recognized as a favorable site for Arab investment. There has been
no public negative comment on the implications of this influx, but
privately citizens are saying Tunisia is being been sold to the
Emirates. The October 19 edition of the weekly magazine Realites
published a large dossier presenting the Emirati projects and
questioned "Why, after having almost ignored Tunisia for the past
twenty to thirty years, and despite the existence of the
Tuniso-Emirate bank since the 1980s, are private Emirati investors
now in such a rush to invest in our country?" Realites concluded
that this is because, "They have been assured by the Tunisian
authorities they will have all the necessary facilities to carry out
their projects under the best conditions, and in all transparency."
However, the way state-owned land is being distributed, and to whom,
suggests that the buyers will be offered all the necessary
assistance. As for transparency, well, it seems to be close to
irrelevant when talking about Emirati investments in Tunisia. END
COMMENT.

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