Cablegate: Opic's Affordable Mortgage, Risk Insurance

VZCZCXRO6974
PP RUEHROV
DE RUEHJM #1800/01 2821432
ZNR UUUUU ZZH
P 091432Z OCT 09
FM AMCONSUL JERUSALEM
TO RUEHC/SECSTATE WASHDC PRIORITY 6259
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 JERUSALEM 001800

SENSITIVE
SIPDIS

NEA/IPA FOR LENTZ; EEB/IFD/OIA; TREASURY FOR KNOWLES; USAID
FOR BORODIN; PLEASE PASS TO OPIC FOR VP DRUMHELLER; NSC FOR
KUMAR

E.O. 12958: N/A
TAGS: ECON EFIN EINV KWBG IS
SUBJECT: OPIC'S AFFORDABLE MORTGAGE, RISK INSURANCE
PROJECTS PICK UP PACE; RAWABI STILL WORKING THROUGH HURDLES

1. (SBU) Summary: An Overseas Private Investment Corporation
(OPIC) delegation visited Jerusalem and Ramallah October 5-7
to further a number of projects, including the affordable
mortgage and political risk insurance programs, as well as to
expand the loan guarantee fund (LGF). OPIC estimates the
mortgage facility could be operational in early 2010, though
it expressed concern that a major residential project which
would provide the target market for these loans (Rawabi) is
lagging behind schedule. End summary.

2. (SBU) OPIC VP Robert Drumheller and Investment Analyst
Maria Goravanchi visited Jerusalem and Ramallah October 5-7
to meet with partners in the approximately USD 500m mortgage
finance facility and other projects.

Rawabi: Land and road issues still outstanding
--------------------------------------------- -

3. (SBU) Bayti CEO Bashar Masri briefed OPIC on the status of
the planned community Rawabi, which OPIC sees as central to
its market for loans. Masri said he is engaged in
negotiations with area landowners to purchase and transfer
land in/around Rawabi. PA officials have been facilitating
these negotiations, he said. The latest proposal is for
Masri to purchase directly any land to which individuals can
show clear title. For land where the title is less clear,
Masri will deposit funds in an escrow account with the PA, to
be disbursed as the land is registered and transferred to
Rawabi. Masri said he gave key landowners a deadline by
which to respond, and claimed that President Abbas has agreed
to meet him in mid-October to discuss the status of the
negotiation. (On October 9, Masri reported to EconOff that
he had reached a verbal agreement with the most significant
landowner; but he would not be confident until it was put in
writing.)

4. (SBU) Masri said he still needs permission from the GOI to
construct an access road (around 3 km of which will pass
through Area C) as well as the PA's blessing on the route.
He told OPIC that if the land issue is resolved, he will move
bulldozers to the site and begin excavation and leveling --
without closure on the road. He characterized this as a
risky move, but said he wants to demonstrate to the PA, GOI,
and donors that Rawabi is "damn serious" about moving forward.

5. (SBU) Masri said he has received strong support from the
PA Ministers of Planning, Local Government, National Economy
and Agriculture. He confirmed that there is still work to do
with the Ministry of Public Works and Housing in order to
resolve the route.

6. (SBU) OPIC's intention has been to synchronize the launch
of the loan facility with the beginning of sales in Rawabi,
as this project provides the greatest market. Other less
ambitious projects, such as al-Reehan, also have an
affordable mortgage component. OPIC and its partners are in
the financing development phase of the program, which
stresses the need to launch the housing developments
alongside the registration of the AMAL loan facility. OPIC
estimates there are currently nine housing projects in the
West Bank, requiring a total of USD 116.5m in infrastructure
funding from donors in order to keep the purchase price in
the affordable range - betweeen USD 50k and USD 120k.

OPIC Ready to Use LGF in Gaza, but Opportunities are Limited
--------------------------------------------- ---------------

7. (SBU) OPIC met with Bank of Palestine (BoP) General
Manager Hashim Shawa and Rami Khoury of CHF to encourage the
expanded use of the Loan Guarantee Fund (LGF) for projects in
Gaza. Shawa said he had some loan applications from Gaza in
the SME pipeline, but lamented that "there is not much
economic activity in Gaza, and almost none that operates
independently of the tunnels." Econoff encouraged Shawa to
put the proposals forward to CHF, and the ConGen will work
with CHF to ensure the LGF is not used in a way that promotes
the tunnel economy. As a result of the conversation, Shawa
said he will forward proposals in certain sectors, including
a beef importer, microfinance, and IT training/development.

Moevenpick
----------

8. (SBU) OPIC and CHF confirmed that the LGF board has agreed
to guarantee a percentage of a USD 5m loan for the Moevenpick

JERUSALEM 00001800 002 OF 002

hotel in Ramallah. The BoP and Cairo Amman Bank are in
negotiations to finalize the breakdown of the loan
(the hotel requires USD 8m total to launch.)

Political Risk Insurance
------------------------

9. (SBU) In a meeting with Samir Shehadeh of the National
Insurance Company, Drumheller noted that two consultants have
been hired to undertake the necessary surveys to establish a
baseline, and finalize the insurance product. The product
will be offered on a pilot basis at first to 13 "known
traders" in the Hebron/Bethlehem area - large companies with
a significant volume of trade through Tarqumiya crossing.

10. (U) OPIC has cleared this cable.
RUBINSTEIN

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