SUMMARY: WELL ATTENDED THREE DAY SEMINAR ON SURPLUS FUNDS HERE
SHOWED GENERAL AWARENESS AMONG REPRESENTATIVES OF BOTH SURPLUS
AND DEFICIT STATES THAT SUDDEN TREMENDOUS INCOMES OF SIX MAJOR
ARAB OIL EXPORTING COUNTRIES CONSTITUTES POLITICAL AND ECONOMIC
"CHANCE OF A LIFETIME" BUT IT ALSO IMPOSES GREAT RESPONSIBILITIES
ON SURPLUS COUNTRIES TO USE MONEY SENSIBLY. IN GENERAL THERE WAS
AGREEMENT THAT MONEY SHOULD BE USED FIRST FOR LOCAL (E.G.
SAUDI OR KUWAITI) DEVELOPMENT, SECOND FOR AID TO OTHER ARAB
STATES, THIRD TO LDCS AND FINALLY AS INVESTMENTS IN TRADITIONAL
FINANCIAL MARKETS. NEVERTHELESS, IT WAS STRESSED THAT NEW CON-
DITIONS OBTAINED REQUIRING GREATER EQUALITY AND RECOGNITION
FOR SURPLUS ARAB STATES IN INTERNATIONAL FINANCIAL AFFAIRS.
DURING CONFERENCE SOME NEW IDEAS WERE FLOATED AND IT WAS REVEALED
THAT MAJOR NEW PETROLEUM INVESTMENT COMPANY IS TO BE FOUNDED BY
OAPEC AND THAT INTER-ARAB INVESTMENT GUARANTY CORPORATION ABOUT
TO BEGIN OPERATIONS SOON. OTHER RELATED MEETINGS ON OIL AND
MULTINATIONAL COMPANIES AS WELL AS A SECOND CONFERENCE ON
MONETARY MATTERS ARE BEING SCHEDULED TO TAKE PLACE DURING 1974.
EMBASSY BELIEVES PARTCIPATION BY SAUDI OFFICIALS WWS PARTICULARLY
NOTEWORTHY. END SUMMARY
1.HMORE THAN 200 ECONOMISTS FROM ARAB COUNTRIES, EUROPE, JAPAN,
AND THE UNITED STATES MET FOR THREE DAYS FEB 18, 19, AND 20,
IN KUWAIT TO DISCUSS
SURPLUS REVENUES OF OIL PRODUCING COUNTRIES.
IN SEVEN SESSIONS INAUGURATED BY CROWN PRINCE/PRIME MINISTER
SHEIKH JABER AL-AHMAD AL-JABER AL-SABAH OF KUWAIT, ROLE OF ARAB
SURPLUS FUNDS IN THE MONEY AND CAPITAL MARKETS IN THE WORLD AND
ESTIMATES OF THE EXPECTED OIL REVENUES AND ABSORPTION CAPACITY
OF ARAB STATES FOR DEVELOPMENT WERE DISCUSSED. IN ADDITION TO
OBSERVERS FROM STATE, COMMERCE, TREASURY, FRB/NEW YORK AND
EMBASSIES JIDDA AND KUWAIT, US PARTICIPANTS INCLUDED PROFESSORS
FROM COLORADO AND RUTGERS WHO WERE AMONG FORMAL SPEAKERS. SOME
BUSINESSMEN, IMF AND IBRD REPS WERE ALSO PRESENT.
2. DURING INITIAL SESSION FOLLOWING OPENING BY KUWAIT PM
(REFTEL, NOTAL), KFAED DIRECTOR ABD AL-LATIF AL-HAMAD DEFINED
MAJOR ISSUES AS FOLLOWS:
A. WILL THERE BE SURPLUSES; IF SO, HOW MUCH AND WHERE?
B. WHAT IS NATURE OF PROBLEM: SHORT, MEDIUM OR LONG TERMS?
C. SCENE HAS SHIFTED TO PRODUCING GOVERNMENTS WITH INTERNATIONAL
OIL COMPANIES BEING SQUEEZED OUT. WHAT NEW INSTITUTIONS SHOULD
REPLACE COMPANIES AND SERVE GOVERNMENTS?
D. WHAT NEW CRITERIA FOR DEVELOPMENT MUST BE DETERMINED? IT WILL
BE NECESSARY TO MAINTAIN VALUE OF ASSETS INVESTED AND ENHANCE
THE DEVELOPMENT PROSPECTS FOR ARAB/LDC STATES.
E. NEW PRICE ISSUES EXIST. HOW CAN PRODUCERS GAIN A FAIR PRICE
FOR OIL, INFLATION BE COMBATTED AND INTERNATIONAL ECONOMIC
EQUILIBRIUM BE MAINTAINED?
F. ATTENTION MUST BE PAID TO RESEARCH IN AREAS OF ALTERNATIVE
SOURCES OF ENERGY, WATER AND ECONOMIC INSOCTUTIONS. AL- AMAD
STRESSED THAT COOPERATION BETWEEN PRODUCERS AND MULTINATIONAL
COMPANIES MIGHT OFFER SOLUTIONS TO SUCH PROBLEMS.
3. THE EXPECTED OIL REVENUES WERE ESTIMATED BY ECONOMISTS DURING
THE NEXT 10 YEARS FOR 6 ARAB PRODUCING COUNTRIES AS REACHING
$750 BILLION. PROJECTED SPENDING WOULD NOT EXCEED $350 BILLION
AND THIS FIGURE WAS USED AS A BENCHMARK FOR ALL OF THE DISCUSSIONS.
IT WAS AGREED THAT THE ARAB COUNTRIES COULD NOT ABSORB SUCH A
FIGURE AND SEVERAL PAPERS DISCUSSED MEANS OF INCREASING THE
INDUSTRIALIZATION AND IMPROVING THE AGRICULTURAL POSSIBILITIES
OF THE ARAB WORLD. REGIONAL COOPERATION AND JOINT ENTERPRISES
WERE DISCUSSED IN DETAIL AND POSSIBLE IMPROVEMENT OF THE INVESTMENT
CLIMATE IN SUCH COUNTRIES AS EGYPT WERE DISCUSSED AT LENGTH BY
THE ARAB HEAD OF THE INTERNATIONAL BANK, NAZNY ABDELHAMID.
4. SOME INGENIOUS IDEAS WERE DEVELOPED BY BOTH AMERICAN AND OXFORD
TRAINED ECONOMISTS INCLUDING INDEXED BONDS AND AN INTERNATIONAL
UNIT TRUST FOR STABILIZING PORTFOLIOS OF THE ARAB COUNTRIES.
IN SUMMARIZING DISCUSSIONS ON MONETARY MATTERS, THERE WAS CLEAR
DISAGREEMENT ON THE QUESTION OF INTERNATIONALIZATION OF FUNDS
FOR USE OF SURPLUSES WITH MANY OPINIONS BEING EXPRESSED THAT
IT WAS BETTER TO LEAVE THE FUNDS IN ARAB HANDS.
5. RE QUESTION OF HELPING THIRD WORLD COUNTRIES (SO-CALLED
"NOPEC"), SEVERAL PARTICIPANTS SUGGESTED THAT IT WOULD BE GOOD
STRATEGY FOR ARABS TO FIND A MEANS TO PICK UP ALL OR MOST OF
THE $10 BILLION ADDED OIL BILL AS A MEANS OF GAINING POLITICAL
SUPPORT FOR MAINTAINING HIGHER OIL PRICES AND "BUY OFF THE
OPPOSITION OF THE THIRD WORLD". IT WAS ALSO AGREED THAT IT WOULD
HELP TO DIVERSIFY ARAB INVESTMENTS TO PLACE SOME OF THE SURPLUS
FUNDS IN THE THIRD WORLD.
6. OAPEC SECRETARY GENERAL DR. ALI ATIQA REVEALED THAT MAJOR
PETROLEUM INVESTMENT COMPANY ABOUT TO BE FORMED UNDER THAT ORGANIZATION. ATIQA SAID THAT FINAL AGREEMENT ON NEW PETROLEUM
COMPANY AIMED AT INVESTING IN THE PETROCHEMICALS AND REFINERY
INDUSTRIES IN ARAB EXPORTING COUNTRIES HAD BEEN MADE TWO WEEKS
AGO IN JIDDA. HE ESTIMATED THAT REFINERIES ALONE BEING DISCUSSED
WOKWD REQUIRE $6 BILLION IN INVESTMENT AND THE PETROCHEMICALS
INDUSTRIES WOULD BE IN THE "TENS OF BILLIONS". OAPEC ECONOMIST
MOHAMMAD TAHIR LATER INFORMED U.S. OBSERVER THAT NO DECISION HAD
BEEN MADE TO INCLUDE EXPLORATION NEW SOURCES OF PETROLEUM IN
OBJECTIVES OF THE COMPANY BUT THAT PRACTICALLY ALL OTHER
PETROLEUM RELATED INDUSTRIES WERE BEING CONSIDERED.
7. THE SHARPEST DIVERSION IN APPROACH BECAME CLEAR WHEN DISCUSSIONS
TURNED TO USING SURPLUS FUNDS IN ARAB COUNTRIES WHERE INVESTMENT
CLIMATE HAS BEEN POOR. HOWEVER, THERE WERE ONLY NOMINAL REFERENCES
TO PUBLIC VS. PRIVATE SECTOR INVESTMENTS DESPITE PRESENCE OF
PUBLIC SECTOR
EGYPTIAN AND SYRIAN ECONOMISTS AND OFFICIALS.
ONE SPEAKER SAID INTER-ARAB INVESTMENT GUARANTY CORPORATION
WILL BEGIN OPERATION IN TWO MONTHS.
8. SAUDI OBSERVERS INCLUDED DEPUTY MINISTER FINANCE A.A. RASHID
AND SAMA FOREIGN EXCHANGE CHIEF AHMAD ABDULATIF. THE LATTER
SUGGESTED AT ONE POINT THAT SAUDI ARABIA WAS INTERESTED IN SEEING
A NEW INTERNATIONAL MONETARY ORGANIZATION WITH SOME OF THE
CHARACTERISTICS OF THE IMF AND THE BANK OF INTERNATIONAL
SETTLEMENTS.
9. ORGANIZERS OF THE SEMINAR WHICH WAS PARTLY FUNDED BY UN
ECONOMIC COMMISSION FOR WEST ASIA AND THE ARAB PLANNING INSTITUTE,
ARE ALREADY ORGANIZING A SECOND AND THIRD SEMINAR ON RELATED
TOPICS ON ALL FACETS OF PETROLEUM INCLUDING PRODUCTION PROGRAM
FOR TRIPOLI IN APRIL, AND ANOTHER ON MULTINATIONALS AND
DEVELOPMENT IN BEIRUT IN JULY.
10. COMMENT: MEETING WAS WELL-HANDLED BY KUWAITI ORGANIZERS AND
DISCUSSIONS IN GENERAL WERE CONDUCTED IN CALM, PROFESSIONAL MANNER
WITH POLITICAL COMMENTARY KEPT TO MINIMUM. NONETHELESS, SOME
SPEAKERS NOTED POLITICAL IMPLICATIONS OF ARAB WEALTH WITH OAPEC
SYG ATIQA ARGUING THAT ARABS SHOULD CONTRIBUTE LARGER AMOUNTS
AND THEREFORE GAIN GREATER POLITICAL INFLUENCE IN IMF, IBRD,
UNDP, ETC. AS MIGHT HAVE BEEN EXPECTED, REPRESENTATIVES FROM DEFICIT COUNTRIES URGED THAT GREAT PORTION OF SURPLUS FUNDS BE
SPENT IN ARAB WORLD WHILE KUWAITIS, SAUDIS AND REPRESENTATIVE OF
ABU DHABI FUND, WHILE ACCEPTING MORAL OBLIGATION TO DO SO,
ALSO RESERVED RIGHT INVEST EITHER AT HOME OR IN TRADITIONAL
INTERNATIONAL FINANCIAL MARKETS. EMBASSY KUWAIT BELIEVES BOTH
IN ORGANIZING SEMINAR AND IN REMARKS DURING SEMINAR KUWAITIS OR
NON-KUWAITIS ASSOCIATED WITH KUWAITI ORGANIZATIONS REVEALED
EXISTENCE HERE OF SOMEWHAT GREATER AWARENESS OF ISSUES INVOLVED
THAN ELSEWHERE IN ARAB WORLD. ON OTHER HAND, AS INDICATED IN
PARA 8, SAUDIS ALSO PLAYED USEFUL ROLE AT SEMINAR. FYI ONE COULD
ALMOST FEEL INTENSITY OF INTEREST OVER WHAT SAUDI OFFICIAL SAID
COMPARED TO REMARKS OF PROFESSORS FROM EGYPT OR LEBANON. END FYI.
BELIEVE SAUDIS MAY HAVE GAINED USEFUL INSIGHTS FROM EXPOSURE
TO VARIETY OF VIEWS AND IN THIS REGARD BELIEVE SAUDI PARTICIPATION
WAS USEFUL. IN GENERAL SEMINAR WAS USEFUL IN PROVIDING FIRST
BROAD DISCUSSION AMONG MANY ARABS TOGETHER WITH OTHERS OVER
SURPLUS FUNDS ISSUES SINCE JANUARY PRICE RISES.
STOLTZFUS
Source: https://www.wikileaks.org/plusd/cables/1974KUWAIT00706_b.html
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