Cablegate: Prt Salad Ad-Din: Mattress Millionaires Look To

VZCZCXRO6010
PP RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #4057/01 3641358
ZNR UUUUU ZZH
P 291358Z DEC 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 1049
INFO RUCNRAQ/IRAQ COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 BAGHDAD 004057

SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN IZ
SUBJECT: PRT SALAD AD-DIN: MATTRESS MILLIONAIRES LOOK TO
BOOST BALAD

REF: BAGHDAD 3540

1. (U) This is a PRT Salah ad-Din reporting cable.

2. (SBU) Summary: Balad's newly rich want to get richer, but
the opportunities they see look too risky. At a December 16
meeting with the PRT, a dozen wealthy sheikhs said they did
not know where to put the millions they had amassed since
2003 through the Sons of Iraq (SOI) and construction
contracts funded by the Coalition. They need a secure place
to store their cash, but they also want to make investments
that will build the Salah ad-Din's (SaD) economy. With
advice and encouragement from the PRT, the sheikhs are making
the first steps toward forming business associations that
will build trust and reduce risks. Embassy Baghdad can help
by connecting successful provincial entrepreneurs with
banking and investment services. End summary.

Millionaire Shiekhs Leave Cash under the Mattress
--------------------------------------------- ----

3. (SBU) At a December 16 meeting with PRT personnel, a dozen
wealthy sheikhs asked for assistance with a problem common to
several successful businessmen in Balad -- where to put the
millions they have amassed since 2003 through the Sons of
Iraq (SOI) and construction contracts funded by the
Coalition. The sheikhs who control the villages surrounding
Balad became contractors when Coalition forces took over a
nearby airbase in 2003.

4. (SBU) That's the good news. The bad news is that the
sheikhs do not have a safe place to store their millions, and
they are ultra-cautious when it comes to making investments.
One sheikh commented that they had "all benefitted from the
chaos since 2003, but we keep our money at home because we
can't trust in the government or the banks." The sheikhs see
the state-owned banks as corrupt and expressed equal
skepticism about the private banks that are establishing
offices in SaD. Another sheikh said he had invested a large
amount of money in a venture to establish a car importing
business, but his Turkish partners had "run off with my money
and cheated me." Instead of partnering with foreign firms,
the sheikhs said local investment projects were the safest
bet for their money, since they know the best local partners
and opportunities.

Local Investment Opportunities;Secure Space from U.S. Forces
--------------------------------------------- ---------------

5. (SBU) The sheikhs' preferred solution for the perceived
risk posed by the banks is an arrangement where they could
store their money at a space on or near the Balad military
base and manage local investment projects. The sheikhs said
the physical security provided by the presence of Coalition
forces was a prerequisite for establishing a secure space,
where they could conduct business. PRT Econ Chief offered to
coordinate further technical assistance for investment and
banking options.

Embassy Comment
---------------

6. (SBU) The sheikhs' glut of cash in an area poorly served
by banks may be unusual in Iraq, but there is a common Iraqi
story at the root of the mattress millionaires' problem.
Building trust between potential depositors and the Iraqi
banking system is a problem with regulatory, cultural, and
security dimensions. The privately owned banks are rapidly
expanding their branch networks in SaD, but it remains
difficult for entrepreneurs to borrow (reftel). At the same
time, the Iraqi public is wary of banks, especially private
ones. The banks do not trust potential borrowers, and their
potential depositors do not trust the banks. This mutual
suspicion magnifies the perceived business risks that are the
main obstacle to private-sector growth in Iraq.
Qmain obstacle to private-sector growth in Iraq.

7. (SBU) One remedy for risk is relationships, which is an
area where the PRTs and the Embassy can assist by connecting
potential clients with professional banking and investment
services. Iraq's prospects for economic growth will improve
when expectations of mutual advantage overcome the habits of
suspicion fostered by decades of dictatorship. PRT Salah
Ad-Din and the Civil Affairs units of the 25th Infantry
Division are using the trust they have gained among local
leaders to build new relationships among Iraqis who until now
could not find a path to cooperation. Building these new
relationships is painstaking work, requiring hours of
meetings and gallons of tea. But this investment of time and
words promises to pay even bigger dividends than millions
spent on bricks and mortar. The Embassy can support this PRT
effort by persuading Baghdad's bankers to take a closer look

BAGHDAD 00004057 002 OF 002

at neglected territory like Balad. End comment.
CROCKER

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