This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ALMATY 001646 
 
SIPDIS 
 
DEPARTMENT FOR SCA/FO (JGASTRIGHT); SCA/CEN (JMUDGE) 
PLEASE PASS TO USAID 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECONOMIC
SUBJECT: A/S BOUCHER AND ADB REPRESENTATIVE DISCUSS REGIONAL 
DEVELOPMENT 
 
¶1.  (SBU) Summary:  In a May 4 meeting, Craig Steffensen of 
the Asian Development Bank (ADB) briefed A/S Boucher and NSC 
Senior Director Millard on the projects the ADB is working 
on in Central and South Asia.  One of the problems for 
regional development and integration, according to 
Steffensen, is that cooperation between countries runs 
smoothly at the technical level where all sides often agree 
on the problems and solutions; however, agreements tend to 
collapse as they get elevated to senior levels.  Moreover, 
Uzbekistan tends to be the weak link in regional cooperation 
as it drags its feet on projects, periodically cuts ties 
with neighbors, and fails to honor commitments.  Steffensen 
stressed that he viewed a north-south transportation 
corridor as a key project to promoting regional integration 
and trade.  End Summary. 
 
¶2.  (SBU) Meeting Participants:  SCA A/S Richard Boucher, 
NSC Senior Director Elisabeth Millard, U.S. Ambassador John 
Ordway, USAID Director Chris Crowley, Political Officer 
Douglas Monk (notetaker), ADB Head of Central Asia Regional 
Economic Cooperation Unit Craig Steffensen. 
 
 
Coordination 
------------ 
 
¶3.  (SBU) In a May 4 meeting with the Head of the Central 
Asia Regional Economic Cooperation Unit of the ADB, Craig 
Steffensen, Assistant Secretary for South and Central Asian 
Affairs Richard Boucher related his impression that the 
goals of the ADB and the USG are similar in Central and 
South Asia.  A/S Boucher stated that one of the goals for 
the U.S. is to get Afghanistan actively involved in both 
Central and South Asia. 
 
¶4.  (SBU) Steffensen commented that as in the case of the 
U.S. Department of State, the ADB has recently reorganized 
and created a Central and South Asia Department.  His unit 
works on transportation, energy, and trade issues throughout 
Central and South Asia.  They work closely with the IMF, 
European Bank, Islamic Bank, UNDP, World Bank, and others. 
He commented that the World Bank, which works many of the 
energy issues, is not fulfilling its responsibilities in the 
region. 
 
ADB Projects 
------------ 
 
¶5.  (SBU) Steffensen stated that the ADB has earmarked $2.2 
billion in loans over the next three years for projects in 
the region, more than one-half of which will go to 
Azerbaijan.  He commented that Azerbaijan is the only 
country in the region that can afford the large loans.  U.S. 
Ambassador Ordway added that Kazakhstan can also afford 
loans. Steffensen said Kazakhstan takes advice on projects 
from international institutions, but funds them on its own. 
This is leading to flagging interest on the part of the 
banks in developing projects with Kazakhstan 
 
¶6.  (U) When asked about the problems ADB has with their 
projects, Steffensen responded that cooperation between 
countries goes smoothly at the technical level where all 
sides often agree on the problems and solutions; however, 
agreements tend to collapse as they get elevated to senior 
levels. 
 
Transportation 
-------------- 
 
¶7.  (U) The major transportation project on which the ADB is 
working is the Almaty-Karachi road project, which will 
create a transportation corridor from Almaty to Karachi and 
the Arabian Sea.  The corridor will connect Kazakhstan, 
Kyrgyzstan, Uzbekistan, Tajikistan, Afghanistan, and 
Pakistan.  Steffensen commented that building through 
Uzbekistan will be difficult because of the political 
climate of the country, and thus plans are to first connect 
through Kyrgyzstan and Tajikistan.  A key part of this 
corridor, which will open up Central Asia, will be the 
bridge that the U.S. is funding from Tajikistan to 
Afghanistan.  The Chinese are also helping fund this road. 
 
¶8.  (U) One of the problems with regional development in 
general, Steffensen stated, was the lack of a project that 
will unite all of the Central Asian countries.  He stated 
his belief that a road from Russia, through Central Asia, to 
the Arabian Sea may be such a project.  This project, 
however, has not yet received much attention. 
 
Energy 
------ 
 
¶9.  (SBU) There are a number of problems in the electricity 
sector stemming both from a lack of lines to homes, as well 
as low generation.  There is also a lack of political will 
to create regional power sharing agreements.  Steffensen 
commented that the regional power trade agreement between 
Uzbekistan and Tajikistan was killed by Uzbek President 
Karimov because he was angry with Tajikistan over other 
issues.  The ADB does little with gas and oil projects. 
 
Trade 
----- 
 
¶10.  (U) Central Asia has an abundance of high quality 
fruits and vegetables, but they are traded inter-regionally 
instead of competing where they would have a strong 
competitive advantage, according to Steffensen.  This is 
because of high transport costs and delays.  If the region 
was able to overcome the transport problems and export their 
produce, this could reduce poverty and boost trade. 
Ambassador Ordway made the observation that transporting 
along the Russian rail line is expensive because there is 
not alternate route.  When A/S Boucher asked what is needed 
for Central Asia to be able to export into China, Steffensen 
answered that China and Kazakhstan are currently funding the 
construction of a duel-track train line across the border. 
 
 
Customs 
------- 
 
¶11.  (U) Steffensen stated that there is a lot of work that 
needs to be done on the customs front to ameliorate regional 
trade.  The border crossing between Almaty and Bishkek runs 
relatively smoothly and quickly as long as truckers are in 
compliance with regulations.  However, if a truck is 
overloaded, the driver is speeding, or is intoxicated, the 
police and border officials will try to impose heavy fines 
and create long delays.  He commented that it is difficult 
to persuade the authorities to reduce tariffs and customs 
duties.  The ADB and IMF are encouraging Central Asian 
states that it is in their best interest to join the WTO as 
soon as possible, and then work on joining customs unions. 
 
 
¶12.  (U) After a discussion about the abundance of Chinese 
goods in Central Asia, A/S Boucher suggested that if goods 
were coming into Central Asia from China, they ought to be 
able to flow in the other direction.  He suggested that it 
appears the problems with trade are to a great extent 
regulatory. 
 
Conclusion 
---------- 
 
¶13.  (SBU) After A/S Boucher asked Steffensen what he would 
emphasize as the most important topics, Steffensen commented 
that he would stress the importance of a North-South 
connection and U.S. leadership in building transport 
corridors.  He stated that there is currently too little 
trade between Central and South Asia, in large part because 
of a lack of roads and united power grids.  The ADB's 
message to Central Asian countries is to cooperate or get 
left behind. 
 
¶14.  (SBU) A/S Boucher followed up by stating that the U.S. 
message is that we are serious about these topics.  The U.S. 
will put money into feasibility studies and help on the 
planning and regulatory sides.  The U.S. and the ADB should 
coordinate their efforts to push the same points with 
regional leaders. 
 
¶15. (U) A/S Boucher cleared this message.