VZCZCXRO2115
PP RUEHLN RUEHVK RUEHYG
DE RUEHDBU #0698/01 1031006
ZNR UUUUU ZZH
P R 131006Z APR 06
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC PRIORITY 7227
INFO RUEHDBU/AMEMBASSY DUSHANBE 8424
RUCNCIS/CIS COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 1465
RUEHBUL/AMEMBASSY KABUL 1465
RUEHIL/AMEMBASSY ISLAMABAD 1515
RUEHAK/AMEMBASSY ANKARA 1537
RUEHRL/AMEMBASSY BERLIN 1535
RUEHKO/AMEMBASSY TOKYO 1306
RUEHBJ/AMEMBASSY BEIJING 1552
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUMICEA/USCENTCOM MACDILL AFB FL
RHMFISS/JOINT STAFF WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 1090
RUEHBS/USEU BRUSSELS 0883
RUEHNO/USMISSION USNATO 1523
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 03 DUSHANBE 000698 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EUR, EB, S/P 
NSC FOR MILLARD, MERKEL 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV EAID ELTN ETRD AF PK TI
SUBJECT: TAJIKISTAN'S TRANSPORTATION SECTOR: BY PLANE, TRAIN, OR 
AUTOMOBILE 
 
REF: A) DUSHANBE 0626  B) KABUL 1629 
 
DUSHANBE 00000698  001.2 OF 003 
 
 
(U) Sensitive but unclassified.  Please handle accordingly.  Not 
for public Internet. 
 
¶1. (U) SUMMARY:  Improving Tajikistan's air, rail, and road 
transportation network supports Secretary Rice's Infrastructure 
Integration Initiative for Greater Central Asia.  Creating a 
cohesive transportation network passable throughout the year 
decreases transportation costs and promotes trade through the 
road (and partial rail) corridor from Kazakhstan to Pakistan. 
The completion of the American-funded bridge in 2007 connecting 
Tajikistan to Afghanistan will add additional trade momentum. 
However, Tajikistan's state-run air sector needs to be 
de-monopolized, the state-run railway urgently needs management 
reform and infrastructure upgrades, and maintenance and 
rehabilitation needs to be increased on roadways to maximize 
trade opportunities.  Ensuring official and non-official trade 
barriers (such as customs and bribes) do not rise along with 
increased trade is important.  END SUMMARY. 
 
STATE-RUN AIR SECTOR MONOPOLY INCHING AHEAD 
 
¶2. (SBU) Tajikistan's air sector is dominated by inefficient 
state-run Tajikistan State Airlines (TSA), and international 
connectivity is limited.  The vertically-integrated company runs 
all air traffic control, the four major airports, and has all 
domestic flights.  Service is abysmal, the aircraft fleet 
consists of dilapidated Soviet-built Tupolevs and Yaks, and 
flight delays and cancellations are the norm (REFTEL A).  Tajik 
Air does not have a transparent ticketing, pricing or 
reservation structure and bribes are often paid to ensure a seat 
on a flight.  Air cargo transport is in its infancy.  The first 
non-Russian carrier, Turkish Airlines, entered the market in 
February with a weekly flight to Istanbul.  (Tajik Air also 
flies internationally to Munich and Istanbul.)  International 
Finance Corporation economist Mathew Scanlon told PolOff on 
April 6 that he had just heard that Lufthansa and Thai Airways 
are interested in starting weekly flights.  (COMMENT:  If true, 
hallelujah!  END COMMENT.) 
 
¶3. (SBU) TSA is a cash cow for company and government officials, 
and one of the country's top taxpayers.  With close to one 
million passengers a year, cash flow is significant and the debt 
load is a "reasonable" $19 million, according to European Bank 
for Reconstruction and Development (EBRD) head Fernand Pillonel. 
  However, thanks to poor accounting and opaque business 
practices, much of the cash flow cannot be accounted for.  For 
example, as much as a third of the cash value of each air ticket 
simply disappears.  The new limited-use VVIP hall TSA built at 
Dushanbe International Airport is on the books at a construction 
cost of $9 million, but experts estimate  the hall cost at most 
$2-3 million.  Use of the hall is limited to international 
delegations.  Reported cost per passenger for private use is 
$235.  Much of TSA's profit is carried on the backs of 
Tajikistan's estimated one million migrant workers who are 
forced to use TSA for most of their travel.  The new Tajik Air 
Director, General Khokimsho Tilloyev, confirmed to PolOff on 20 
March that 90 percent of the airline's passenger load is to 
Russia. 
 
¶4. (SBU) Progress in modernizing TSA is slowly coming at the 
urging of the international community.  The EBRD is at the 
forefront of advocating a change, using over $10 million in 
loans since 1995 for runway rehabilitations, air navigation 
improvements, and fleet modernization as leverage.  The entry of 
Turkish Airlines into Tajikistan is a major step forward in 
introducing competition, as are the now daily flights from 
Russia's Domodedova Airlines. 
 
 
DUSHANBE 00000698  002.2 OF 003 
 
 
¶5.  (SBU)  EBRD has offered TSA a $5 million commercial loan for 
fleet modernization to include the lease of two new aircraft and 
training for up to 20 flight crews.  However, factions within 
TSA oppose the loan, perhaps in part due to the international 
 
SIPDIS 
accounting standard requirements, and the government has been 
slow to implement the proposed fleet modernization.  The 
controversial loan may not produce the intended results, noted 
Pillonel, but "not doing anything is not an option."  Pillonel 
stressed that moving too fast and collapsing TSA is not in the 
best interest of the country, and advocated steady pressure to 
reform and spin off the major components (air control, airline, 
and airports) prior to any privatization plans.  He observed 
that technical assistance from USTDA could go towards helping 
TSA create a sensible plan for separating its three enterprises. 
 
SIPDIS 
 
RAILWAY REFORM CRITICAL FOR TRADE 
 
¶6. (U)  Tajik railways are a vital component of Tajikistan's 
trade.  The World Bank estimates 95 percent of total external 
tonnage and about 50 percent of seasonal workers travel to 
Russia by rail.  Aluminum is carried by train to ports in 
Georgia and Estonia, and cotton mainly goes to the Port of Riga 
in Latvia.  Annual tonnage is approximately 12 million, 
according to the Railway Department chief specialist Ishon Hujai 
Rustam.  In addition, until the Anzob pass is completed next 
year, rail provides the primary means for northern Tajikistan to 
trade with the southern region during winter.  There is a total 
of 950 kilometers (km) of railroad in Tajikistan.  The main 
components are the northern route connecting with Uzbekistan, 
the central route that loops from Uzbekistan back into 
Tajikistan up to Dushanbe, and a domestic southern route that 
goes from Dushanbe to Kulob.  Rail transit tariff disputes 
between Uzbekistan and Tajikistan often add to the cost of 
transport, and a World Bank study indicates state-run Tajik Rail 
charges transit fees favoring large businesses over smaller 
entrepreneurs.  As Tajikistan's links with Afghanistan and 
Pakistan grow, a rail link south would make sense, especially 
with respect to cotton shipments, since the textile factories in 
Pakistan are much closer than the port of Riga. 
 
¶7. (U)  Tajik Rail is in urgent need of reform and requires 
substantial investment for rehabilitation and modernization. 
The World Bank notes Tajik Rail has seen almost no reform since 
the country's independence, and there is little transparency in 
its operations.  International financial institutions have not 
funded much for railroad rehabilitation, although the Asian 
Development Bank (ADB) did assist in electrifying part of the 
railway in the northern region.  During a March 16 meeting with 
PolOff, Rustam described the poor state of the railroad system 
in which most of the railway cars are reaching their expiration 
date and at least 20 percent of the railway infrastructure needs 
rehabilitation.  The Ministry of Transport is pushing to get the 
railway from Dushanbe to Qhurgon-Teppa rebuilt, because it is 
unusable due to lack of maintenance, and is looking for donors 
to extend the railroad from Kolkhozobod to the border with 
Afghanistan at Nizhniy Pyanzh.  There is no railroad between 
Dushanbe and the northern capital Khujand. 
 
BOOM IN ROAD, TUNNEL, BRIDGE BUILDING 
 
¶8. (U) The Ministry of Transportation's goal of providing 
year-round transportation routes throughout the country by 
building roads, tunnels and bridges is close to becoming 
reality.  Financed by a surge in donor grants and credits, the 
country could be connected year round by the end of the decade 
between to all of its neighboring countries: 
 
-- The Chinese reportedly agreed this month to finance the $269 
million rehabilitation of the Dushanbe-Khujand-Buston motorway 
 
DUSHANBE 00000698  003.2 OF 003 
 
 
to the Uzbek border using some of a economic credit in the 
Shanghai Cooperation Organization.  This project also includes 
building a tunnel through the Sharistan mountain pass and links 
with the $40 million Anzob tunnel, making this road year-round 
when complete.  The tunnel is 75 percent financed by Iran. 
 
--In 2004 the Murghab-Kalma road connecting to the Chinese 
border in remote eastern Tajikistan was completed with Chinese 
funding. 
 
--The Chinese-funded $18 million Shar-Shar tunnel on the road 
east, and on the way to President Rahmaon's hometown, is 
expected to be complete in 2008. 
 
--The ADB approved at the end of 2005 additional funding to 
rehabilitate a 90 km section of the main road from Dushanbe to 
the Kyrgyz border, which is part of the Central Asian Highway 
connecting Kazakhstan, Tajikistan, Uzbekistan, Afghanistan, and 
China. 
 
-- The ADB also has funded road rehabilitation in Tajikistan's 
southern Khatlon region. 
 
--The U.S.-funded $30 million bridge at Nizhniy Pyanzh is 
scheduled to open summer 2007.  This will be an extremely 
important step toward promoting trade between Tajikistan and 
Afghanistan (REFTEL B), especially if the Japanese-financed 
upgrade to the final road segment between Kolkhozobod and 
Nizhniy Pyanzh is completed in 2007, although current 
information suggests the Japanese are falling behind on this 
project. 
 
¶9. (U) COMMENT:  If they build it will trade come?  The surge in 
much-needed infrastructure upgrades is a strong incentive to 
increase trading, but this depends on what the official and 
unofficial transport costs become.  Tajikistan's biggest trade 
barrier is itself, because bribes are a substantial addition to 
moving goods, and corruption hampers competitive 
export-orientated business development.  Road, bridge, and 
tunnel maintenance also will be important to truck transport. 
Transport by air cargo likely will not be developed without 
air-sector reform.  All of these projects are critical for 
Tajikistan to have a viable economy that can support its surging 
population of young people.  In the end, trade becomes a 
security issue, because having hundreds of thousands of youths 
unemployed in Central Asia is a sure way to breed discontent and 
instability.  END COMMENT. 
 
 
 
HOAGLAND