VZCZCXRO3163
OO RUEHBC RUEHDE RUEHDIR RUEHIK RUEHKUK RUEHYG
DE RUEHBUL #5238/01 3020322
ZNR UUUUU ZZH
O 290322Z OCT 06
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3782
RUCPDC/USDOC WASHDC IMMEDIATE
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0190
RHEHAAA/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUCNAFG/AFGHANISTAN COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS SECTION 01 OF 04 KABUL 005238 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
DEPT FOR EB/TPP DAS CHRIS MOORE and EB/TPP/BTA/ANA:MBGOODMAN 
DEPT FOR SCA FRONT OFFICE (DAS GASTRIGHT) AND SCA/A 
DEPT PASS AID/ANE 
DEPT PASS USTR FOR HARTWICK, KLEIN, AND GERBER 
USDOC FOR SHAMROCK AND DFONOVICH 
TREASURY FOR ABAUKOL 
NSC FOR AHARRIMAN 
OSD FOR BRZEZINSKI 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EINV EFIN AF
SUBJECT:  AFGHAN COMMERCE MINISTER VISIT - OPPORTUNITY TO STRESS OUR 
PRIORITIES 
 
KABUL 00005238  001.2 OF 004 
 
 
(U) This cable contains SENSITIVE BUT UNCLASSIFIED INFORMATION, 
Please protect accordingly.  Not for INTERNET DISTRIBUTION. 
 
TAGS: ETRD ECON EINV EFIN AF
SUBJECT:  VISIT OF AFGHAN COMMERCE MINISTER FARHANG - AN OPPORTUNITY 
TO STRESS OUR ECONOMIC PRIORITIES 
 
(U) This cable contains SENSITIVE BUT UNCLASSIFIED INFORMATION, 
Please protect accordingly.  Not for INTERNET DISTRIBUTION. 
 
1.(SBU) SUMMARY: The Afghan Minister of Commerce and Industry 
(MOCI), Dr Mir Mohammad Amin Farhang, will be visiting the U.S. to 
participate in the Annual Matchmaking conference of the Afghan 
International Chamber of Commerce (AICC).  He will meet with senior 
USG officials to discuss economic cooperation and policy.  Since 
moving from the Ministry of Economy to MOCI, Farhang has done little 
to meet London Compact donor benchmarks on market-oriented 
commercial law reform.  Indeed, Embassy perceives that the 
German-educated Farhang is being strongly influenced by GTZ staff 
who are advising him to stall commercial reform.  Additionally, GTZ 
is pushing to establish a European-modeled unitary chamber of 
commerce that threatens the legal existence of the AICC.  Meanwhile, 
progress towards a private sector friendly commercial environment, 
WTO Accession and other key trade policy goals is moving slowly. 
Embassy requests that senior Washington officials deliver a strong 
message to Farhang to make commercial legislative and policy reform, 
WTO accession, and implementation of the Border Management 
Initiative his highest priorities.  Embassy is considering a 
bilateral intervention with the German Ambassador regarding GTZ's 
activities that are diverting Farhang from goals established by the 
donor community.  We will also continue coordinate actively with 
other donors through the London Compact JCMB process to press the 
GoA to take the critical steps needed in these areas. See key 
recommended policy points for Farhang meetings in para 8). END 
SUMMARY 
 
------------------------------------- 
New Minister Meeting Low Expectations 
------------------------------------- 
 
2.(SBU) The new Minister of Commerce and Industry was previously the 
Minister of Economy where his performance was rated by most 
international agencies as poor.  In his new job, Farhang has started 
slowly with the design and implementation of the economic reform 
policies essential for economic growth and development.  In 
particular, the MoCI has not aggressively moved toward developing an 
economic environment built upon an open trading system and a sound 
commercial legal framework.  For example, MoCI is responsible for 
implementing two benchmarks agreed as part of the Afghanistan 
Compact: (8.3) Private Sector Development and Trade and (8.5) 
Regional Cooperation. Reporting has been poor, coordination weak, 
and action virtually nonexistent.  Embassy regards the following 
issues as urgent and strategic to improving budget sustainability 
and economic growth. 
 
-------------------------------------- 
COMMERCIAL LEGAL AND REGULATORY REFORM 
-------------------------------------- 
 
3.(SBU) MoCI is responsible for reforming Afghanistan's commercial 
legal framework to make the country more attractive to domestic and 
foreign investors.  This is a major element in the Afghanistan 
Compact benchmark 8.3 to submit to Parliament 'Business 
Organization' legislation (i.e., the Corporation and Partnership 
Laws); prepare and submit to the Council of Ministers the remaining 
key commercial laws, including (i) Contract Law; (ii) Mediation Law; 
(iii) Standards Law; (iv) Trademark Law; (v) Patent Law; (vi) 
Copyright Law and (vii) Arbitration Law.  Bearing Point contractors, 
supported by the American Bar Association have drafted the laws. 
The drafts have been circulated among donors, government officials, 
and the business community and comments have been incorporated into 
 
KABUL 00005238  002.2 OF 004 
 
 
the revised version.  Embassy has also sent the drafts to USTR for 
review for WTO compatibility in order to bolster them against 
potential attempts to amend them by Afghanistan's parliament. 
Unfortunately, GTZ advisors in the ministry appear to be influencing 
the minister to slow down his introduction of the laws to 
parliament.  In contrast, the Finance Ministry has moved seven key 
financial reform laws through parliament already. 
 
4.(SBU) Enacting new legislation is only the beginning of this 
reform process.  New regulations and procedures must also be drafted 
to implement the new laws.  In addition, MoCI needs to review and 
reform commercial regulations for which it is responsible, with the 
highest priority being the system of business (trade) licensing. 
Ideally, this system should be eliminated or radically streamlined. 
A second initiative in this area is strengthening consumer 
protection by establishing a consumer protection unit as part of the 
new Legal and Regulatory Affairs Directorate in MOCI.  Finally, as 
part of the newly established Afghanistan National Standards 
Authority (ANSA), MOCI needs to establish appropriate standards 
policies and technical committees, create a Technical Regulations 
Inspectorate within ANSA, and develop metrology laboratories.  What 
progress we have made to date has been due to the proactive 
interventions of USAID's Bearing Point contractors. 
 
----------------- 
OTHER PRIORITIES? 
----------------- 
 
5.(SBU) While progress on the above legislative and regulatory 
reform agendas has largely stalled, the ministry, in conjunction 
with GTZ advisors to the Minister, has drafted and circulated a new 
Chamber of Commerce Law based on the European unitary chamber model. 
 The US Mission has invested heavily in the organization of AICC as 
an independent business advocacy and promotion group.  In August, 
the old Afghanistan Chamber of Commerce and Industry Reform 
Commission led a process to determine how to work with AICC.  A vote 
was held after regional consultations on whether the private sector 
preferred a single or multiple chamber system.  A badly flawed 
process produced a decision in favor of the unitary system.  We have 
taken the position that the GOA can designate any entity as its 
"official" chamber of commerce, so long as freedom of association 
and the right to petition government for change is not abridged. 
(NOTE:  AICC is the co-sponsor of the matchmaking/roadshow visit to 
the U.S. in which Farhang is participating.  It would be helpful to 
highlight AICC's positive role both publicly and privately.  END 
NOTE) 
 
-------------------------------- 
DEVELOPING TRADE POLICY CAPACITY 
-------------------------------- 
 
6.(SBU) The MOCI is the lead GOA institution for the development and 
implementation of Afghanistan's national trade policy.  At present, 
this is defined through publicly stated goals of acceding to both 
the WTO and the South Asia Free Trade Area (SAFTA).  The US Mission 
along with Bearing Point contractors have been pushing the pace of 
these projects, but capacity within the ministry is limited.  The 
Minister recently agreed that Bearing Point would provide a 3-month 
long trade policy capacity building course for GOA staff to bring 
them to a level at which they can effectively participate in WTO 
Accession negotiations.  The course is expected to begin in January. 
 Our plan is to arrange for a small group of graduates from this 
program then to travel to Washington for two weeks of advanced 
training on WTO issues and trade policy.  Meanwhile, the draft 
Memorandum of Trade Regime is still a work in process, the proposal 
to form a ministerial level WTO accession coordination committee has 
not yet been approved, and the GOA has not yet established a 
well-defined strategic plan for accession. 
 
7.(SBU) For Afghanistan to achieve its vision of resuming its 
historical role as the "crossroads of Asia," Minister Farhang and 
 
KABUL 00005238  003.2 OF 004 
 
 
the MOCI must rise to the challenge of improving the commercial and 
transit trade environment.  Renegotiating the Afghan Trade and 
Transit Agreement with Pakistan and reactivating Afghanistan's 
membership in the Transport Internationaux Routiers (TIR).  Another 
pair of projects within MOCI's jurisdiction includes implementing 
the Corridor Development Plan of the Central and South Asia 
Transport and Trade Forum initiative, and the transit and customs 
initiatives embodied in the Central Asia Regional Cooperation 
(CAREC) and Central and South Asia Transport and Trade Forum 
(CSATTF) agreements. Finally, we have increased efforts to work with 
the MOCI directly to make sure it is contributing to progress on the 
Border Management Initiative. 
 
--------------------------------------------- ------ 
FARHANG VISIT: AN OPPORTUNITY TO ADVANCE USG AGENDA 
--------------------------------------------- ------ 
 
8.(SBU) Minister Farhang's visit to the US is an opportunity to 
engage him on the issues outlined above and influence him to 
accelerate the market-oriented reforms we are advocating to attract 
private sector investment, both domestic and international. 
Specifically, he should be pressed to support rapid commercial 
legislative reform and advocate these changes with parliament. The 
reforms should be WTO compliant and be quickly presented to Cabinet 
and then introduced to parliament.  Senior U.S. officials should 
underscore that Chamber of Commerce reform should take a back seat 
to the broader legislative agenda and that it should not abridge 
freedom of association and the right to petition government for 
change.  U.S. officials should make clear the importance of WTO 
accession as a means to drive reform and that the MOCI should pursue 
this with vigor.  In addition, it is important that Farhang hear in 
Washington that his cooperation with the Border Management 
Initiative is imperative to that program's success.  Lastly, the 
Minister should be encouraged to rely on US Bearing Point advisors 
to assist him in implementing these important reforms. 
 
------- 
COMMENT 
------- 
 
9.(SBU) According to USAID Bearing Point advisors and Embassy ECON 
staff, Minister Farhang is open to persuasion.  Since he is fluent 
in German and was a long-time German resident, the German advisors, 
principally an Afghan German advisor, have his ear, so Farhang has 
been sympathetic to German advice to slow progress on commercial 
reform while moving forward on the Chamber of Commerce initiative. 
Farhang is also known for a predilection to socialist thinking that 
makes him susceptible to European arguments towards more state 
control of the economy. This orientation does not incline him to the 
fast track policy implementation that is needed to address 
Afghanistan's current political, economic and security situation. 
Immediate results are required and fast track policy implementation 
is needed to achieve this. 
 
¶10. (SBU) Post will continue to coordinate actively with other 
donors through the London Compact Joint Coordinating and Monitoring 
Board (JCMB) to press the GoA to take the critical steps needed in 
these areas. We have raised this previously with key donors in the 
JCMB informal Tea Club format, and have recently pressed our 
objectives in both the relevant Afghan National Development Strategy 
(ANDS) working group (WGs) and coordinating groups (CGs - 
Ministerial level). We further intend to highlight these concerns 
during the upcoming half-year plenary session of the JCMB scheduled 
on November 12. A clear message to Farhang on the key points above 
from Washington interlocutors would make a significant contribution 
in helping to advance our major policy objectives. 
 
11.(SBU) Building on Minister Farhang's experience and cultural 
connections to Germany, GTZ staff, particularly Afghan-German Senior 
Advisor to the Ministry Shafic Gawhari, has gained an advantageous 
position in the Ministry, adversely affecting relations between the 
 
KABUL 00005238  004.2 OF 004 
 
 
MOCI and USAID Bearing Point. Bearing Point has also received 
signals from the Minister that it should seek offices outside of the 
Ministry, and the advisors have been increasingly marginalized from 
what is happening in the Ministry.  Post will continue to examine 
ways to improve GTZ-USAID and German - USA donor coordination. END 
COMMENT.