VZCZCXRO8047
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHKB #0447/01 0811341
ZNR UUUUU ZZH
R 221341Z MAR 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 9931
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 1557
RHMFITT/CDR USEUCOM VAIHINGEN GE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 BAKU 000447 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EAID ETRD PREL PGOV KFLU AJ
SUBJECT: AZERBAIJAN: AMBASSADOR'S ECONOMIC VISIT TO 
ISMAILLY AND SHEKI REGIONS 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION - 
HANDLE ACCORDINGLY. 
 
¶1. (SBU) SUMMARY: Ambassador Harnish traveled to Ismailly and 
Sheki March 9 and 10 to open a Regional Information Center 
and a renovated pre-school and boarding school funded by the 
U.S.  During the trip, the Ambassador met with local 
government officials and discussed economic and political 
development and the local governments' response to the avian 
influenza threat.  Local officals in both cities are actively 
engaged in AI surveillance and have created commissions to 
monitor the threat.  The Ambassador also visited the 
U.S.-funded Junior Achievement economic curriculum at a Sheki 
high school that is laying the groundwork for future business 
leaders.  Both regions are rural and poor and their 
agricultural sectors require significant investment.  Several 
local businessmen told the Ambassador that they are looking 
to purchase U.S. equipment.  While the investment and 
business climate is positive, local business leaders bemoaned 
the lack of coordination and means to exchange investment 
plans and ideas.  END SUMMARY. 
 
¶2. (SBU) On March 9 and 10, Ambassador Harnish traveled to 
the cities of Ismailly and Sheki in northwestern Azerbaijan 
to open a Regional Information Center and participate in the 
opening ceremony of a pre-school and boarding school funded 
by the EUCOM Humanitarian Assistance Program.  During the 
trip, the Ambassador met with the local governors (ExCom), 
local NGOs, visited a local high school Junior Achievement 
program and hosted a lunch with Sheki entrepreneurs and 
business leaders.  Most of the interlocutors during the trip 
stressed the need for assistance to continue economic and 
infrastructure development.  In Ismailly, the Ambassador met 
two Peace Corps volunteers at the RIC event and in Sheki he 
hosted dinner for the five local Peace Corps volunteers. 
Ismailly is a rural city of less than 25,000 inhabitants and 
Sheki is an agricultural city of 65,000 that has a growing 
tourism sector. 
 
Ismailly ExCom 
-------------------- 
 
¶3. (SBU) During a brief courtesy call, Rovshan Sadikhov, 
Ismailly ExCom, told the Ambassador that he is looking to 
develop and expand the economic base of his primarily 
agricultural region.  Sadikhov said that in 2006 the GOAJ 
would begin work on the Baku-Gabala road, which should 
increase the region's export markets.  Sadikhov said that 
other than farming, a privately owned carpet factor and 
vineyard provided the only employment opportunities to the 
local population.  He noted that the majority of private 
investment in Ismailly region came from investors from Baku. 
Sadikhov noted that Ismailly had more than 150 historic sites 
that could provide the base for a small tourism industry to 
grow.  Sadikhov knew the exact number of Peace Corps 
volunteers in Ismailly, even naming one former English 
teacher.  After the meeting, both the Ambassador and the 
ExCom walked to the central library to open the U.S.-financed 
Regional Library Information Center. 
 
¶4. (SBU) Sadikhov raised the subject of democracy with the 
Ambassador and said that in Ismailly there was an open 
dialogue with the population.  He noted that in the past 10 
months he has hosted more than 15 meetings with local 
citizens.  He claimed that the November 2005 Parliamentary 
elections in Ismailly were democratic.  The Ambassador 
responded that local authorities should allow civil society 
and political debate to grow.  He noted that the ExComs 
should encourage dialogue and the improvement of society and 
should play a key role in supporting civic activism. 
 
¶5. (SBU) Turning to avian influenza, Sadikhov told the 
Ambassador that he had formed a commission to monitor the 
situation and had sent samples to Baku.  He added that 90 to 
95 percent of the local birds or poultry were "kept safe." 
Although he did not know the total amount of commercial 
chicken operations in his region, Sadikhov said that one 
broiler with 80,000 chickens kept its poultry indoors. 
 
Sheki ExCom 
----------- 
 
¶6. (SBU) Upon arrival in Sheki, the Ambassador called upon 
ExCom Nazim Ibragimov and discussed the economic development 
of the region.  Ibragimov began by noting that Sheki has a 
 
BAKU 00000447  002 OF 003 
 
 
long history of trading and business and its citizens 
"enjoyed making money."  Ibragimov said that investment in 
Sheki was low and, according to him, the region needed more 
than USD 100 million for economic development.  He stated 
that his first goal was to create a positive investment 
climate.  Ibragimov inquired about available U.S. 
agricultural assistance programs and said that local 
companies wanted to purchase U.S. equipment. 
 
¶7. (SBU) Ibragimov told the Ambassador that Sheki has six 
local newspapers and that the ExCom office does not inhibit 
freedom of the press.  He added that democratic development 
requires peace and cooperation.  Ibragimov noted that he 
maintained a friendly relationship with all citizens in Sheki 
and that his door was always open.  He was aware of the 
number of Peace Corps volunteers and added that Sheki would 
accept more volunteers. 
 
¶8. (SBU) Regarding avian influenza, Ibragimov said that Sheki 
had established a commission to monitor the situation and 
convey information to the local population.  He stated that 
he received updates three times a day from local officials. 
According the Ibragimov, there have been no die-offs of birds 
in the Sheki region.  He noted that there were only a few 
chicken broilers operating in the region.  The Ambassador 
raised the idea of providing financial compensation to 
farmers affected by AI.  Ibragimov agreed that such a 
compensation plan was a good idea and that a Sheki 
parliamentarian had also raised it during a recent visit. 
 
¶9. (SBU) Ibragimov told the Ambassador that there were many 
commercial opportunities for U.S. companies in Sheki.  He 
also noted that many local companies had recently purchased 
Chinese, Turkish and German manufactured equipment. 
Ibragimov noted that U.S.-made equipment was known for its 
high quality and thus highly sought after.  The Ambassador 
mentioned to Ibragimov that there were several different U.S. 
programs, including PRAGMA and EXIM financing, available to 
assist local businessmen purchase U.S. equipment.  The 
Ambassador also suggested that the American Chamber of 
Commerce might be able to visit Sheki (as it did in Ganja) in 
order to identify any agriculture and commercial 
opportunities.  Ibragimov welcomed any visits from the AMCHAM 
and other U.S. business groups. 
 
Junior Achievement & Project Harmony 
------------------------------------ 
 
¶10. (SBU) Ambassador Harnish visited Sheki High School number 
18 to review a USAID-sponsored Junior Achievement economic 
classroom.  The Ambassador gave a brief lecture on "labor 
productivity" and answered several tough economic questions. 
Project Harmony and Junior Achievement Azerbaijan, a local 
NGO, have been operating this program since March 2003. 
Junior Achievement Azerbaijan has forged a strong 
relationship with the Ministry of Education, which has 
replaced its own economics curriculum with Junior Achievement 
Azerbaijan's Applied Economics curriculum in affiliated 
schools.  Junior Achievement Azerbaijan has introduced an 
economics curriculum for 10th and 11th grade students with 
the purpose of educating young people in the principles of a 
market economy and the basics of economic theory that will 
help them develop as future business leaders and 
entrepreneurs.  Junior Achievement Azerbaijan has provided 
more than 22,000 10th and 11th grade students from SEE 
schools with textbooks (translated into Azerbaijani and 
Russian) and more than 200 educators with teaching materials. 
 In addition, participating school students practice applied 
Economics through taking part in Management and Economics 
Simulation Exercise and receive training on computer usage 
and Internet collaboration. 
 
Local Businessmen Discuss Business Climate 
------------------------------------------ 
 
¶11. (SBU) Before departing Sheki, the Ambassador hosted a 
lunch with five local businessmen and entrepreneurs.  The 
owners of the local silk factory, brick factory, canning 
operation, agricultural leasing company and juice factory 
told the Ambassador that Sheki businesses need U.S. 
equipment, financing and economic assistance.  The Ambassador 
provided a short briefing on U.S. agricultural assistance 
programs, including PRAGMA.  All commended the knowledge of 
local Sheki employees but lamented the region's overall lack 
of capacity and technology.  Three of the businesses are 
 
BAKU 00000447  003 OF 003 
 
 
relatively new, having started in late 2005 with some 
assistance from the GOAJ.  Some of the business owners had 
previous experience during the Soviet Union period and 
developed their current businesses as a direct result of 
previous business contacts and know-how. 
 
¶12. (SBU) Most of the businesses export their goods to Baku. 
The local brick maker told Ambassador Harnish that current 
brick capacity was 30,000 bricks a day, with the majority of 
them being transported to Baku.  The brick maker noted that 
in order to expand his business he need to upgrade his 
equipment and make more than USD 1 million in investments. 
With recent upgrades, the brick factory should soon increase 
production to 50,000 bricks per day.  Several of the 
businessmen told the Ambassador that they had recently 
purchased large equipment from Turkey, Germany and Italy. 
The brick factory owner said that he wanted to purchase 
cement and brick manufacturing equipment from the U.S. 
 
¶13. (SBU) The Agroleasing business representative told the 
Ambassador that his operation was providing interest free 
loans to purchase fertilizer and below market lending rates 
for large farm equipment, such as tractors.  Agroleasing is 
connected to the Ministry of Economic Development and is 
charged with developing agricultural activities in the 
regions.  In addition to the services provided by the 
Agroleasing business, the juice factory director told the 
Ambassador that his firm had received a USD 150,000 loan from 
the GOAJ at a favorable interest rate.  The juice factory, 
using locally procured berries, is also looking to expand 
production capacity.  The juice factory owner also noted that 
it is selling its "juice-box" products to the Ministry of 
Defense. 
 
¶14. (SBU) The Sheki businessmen told the Ambassador that 
there was no local Sheki business or chamber of commerce.  In 
addition, they noted that the business leaders rarely 
gathered together to exchange business ideas or contacts. 
While the business climate in Sheki is good, there is a need 
for better equipment, technology and training that could 
assist the region's development.  The role of the GOAJ in 
providing low interest loans to farmers and businessmen in 
the regions has caused some of the International Financial 
Institutions to question the government subsidies.  The IFIs 
are concerned that the funds are being given to 
politically-connected businesses rather than to sectors and 
industries that really have a need. 
HARNISH