VZCZCXRO8714
RR RUEHDBU RUEHIK RUEHYG
DE RUEHBUL #0216/01 0221137
ZNR UUUUU ZZH
R 221137Z JAN 07 ZDK
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 5629
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHMFIUU/COMSOCCENT MACDILL AFB FL
RUCNDT/USMISSION USUN NEW YORK 3553

UNCLAS SECTION 01 OF 02 KABUL 000216 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR SA/FO, SA/A, S/CR, EUR/RPM 
NSC FOR HARRIMAN 
CENTCOM FOR CG CFC-A, CG CJTF-76 
REL TO NATO/AUS/NZ 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV ELAB EAID AF IR
SUBJECT: PRT FARAH: ECONOMIC SNAPSHOT -- POPPY AND IRAN 
DOMINATE, ECONOMY AND TAXES STRUGGLING 
 
KABUL 00000216  001.2 OF 002 
 
 
¶1.  (SBU) SUMMARY:  Despite being dry and barren, Farah 
depends heavily on agriculture.  Although poppy production 
has decreased recently, Farah remains a major poppy producing 
province.  Governor-led eradication has begun, but it has a 
long way to go.  The Alternative Livelihoods Program is not 
available in the province.  Farah could become a candidate if 
sufficient suppemental funds are approved.  Iran continues to 
serve as a major economic life line for the province.  The 
majority of men in Farah seek employment in Iran, and Iranian 
products and currency are common in bazaars.  Tax collection 
is almost non-existent.  END SUMMARY 
 
The Economy: Poppy and Iran 
--------------------------- 
 
¶2.  (SBU) Although a mostly dry and barren region suffering 
from years of drought, Farah is mainly an agricultural 
society.  Fruits and vegetables, predominantly wheat and 
corn, are the province's staples.  However, due to current 
water shortages, poppy now dominates agricultural production. 
 Much of the poppy produced is smuggled into Iran.  While 
poppy production decreased last year, other agriculture did 
not take up the slack as markets and distribution channels 
for other crops remained limited.  Alternative Livelihood 
Program money is not available in Farah, so without external 
support, farmers will continue to find it difficult to 
profitably switch crops. 
 
¶3.  (SBU) Given that Farah Province shares a long border with 
Iran, most products sold in the Farah City bazaar are 
smuggled in from Iran and purchased with Iranian currency. 
Local businesses include ice cube producers, bakeries, and 
120 chicken farms that import chicks from Iran.  Construction 
companies handling government projects, local NGOs, and PRT 
contracts dominate Farah's private sector. 
 
¶4.  (SBU) Farah Province has roughly 428,000 inhabitants, 
100,000 of whom reside in the provincial capital, Farah City. 
 The unemployment rate is estimated to be high.  The majority 
of family breadwinners, including many women from throughout 
the province, seek work in Iran.  The Iranian Consulate in 
Herat recently increased its visa fees for Afghans from USD 
20-30 to USD 100, which has resulted in an increase in 
illegal border crossings along the Nimroz Province border 
just south of Farah.  Women tend not to work in the private 
sector, but some work in government and non-governmental jobs. 
 
Tax Collection Non-Existent 
--------------------------- 
 
¶5.  (SBU) Farah local governmental entities levy a number of 
annual taxes.  Tax collection, however, is almost 
non-existent.  The collection rate for district and business 
taxes ranges from zero to two percent.  Construction 
companies are assessed a tax of three percent of the price of 
contracts, but many fail to submit their contracts to the tax 
office.  The following are the main taxes in Farah: 
 
-- The district tax is one to six percent of income; the tax 
office has no mechanism or power to collect money, even 
though there is supposed to be a resident tax officer in each 
district. 
-- Land tax is 50 Afghanis (50 Afs equal one USD) per jerib 
(five jeribs equal one hectare), but no tax is due during 
drought years. 
-- The shop (city) tax is six percent on the inventory value 
and two percent on profits, though no one shows much profit. 
Wholesalers are charged 18 percent on receipts (with a 10,000 
Afs or USD 200 penalty for not having receipts) and two 
percent on reported profits (what the businessman decides to 
report). 
-- The flour mill tax is based on amounts produced and the 
horsepower of the engine used to grind the wheat )- 24 
horsepower pays 4800 Afs (USD 96), 16 horsepower pays 3200 
Afs (USD 64), and 12 horsepower pays 2400 Afs (USD 48) tax. 
 
KABUL 00000216  002.2 OF 002 
 
 
-- Transport charges are based on vehicle weight and range 
from 2000 to 30,000 Afs (USD 40-600).  The collection rate 
for this tax is estimated at 50 to 60 percent. 
-- The professional fee is for doctors with more than ten 
years of experience and is assessed at 1000 Afs (USD 20) for 
every year of experience. 
-- City fees range from two to six percent, based on income; 
there is a 20 to 30 percent collection rate. 
 
¶6.  (SBU) To raise revenue, the Farah City mayor can collect 
rent from government-owned shops or houses and one month's 
rent per year from private shops.  A five percent collection 
rate is normal.  The mayor can also sell government land, 
though this is not always done transparently or fairly.  The 
mayor recently sold some land next to the PRT which may turn 
out to be PRT-authorized-use land and not for sale. 
Purchasers already building on the land may be forced to 
remove any structures. 
 
¶7.  (SBU) Taxes are collected between July and December. 
Money collected is sent to Farah City and deposited into a 
special tax account.  Kabul officials determine what 
percentage of these funds stays in the province.  According 
to many villagers, some district administrators collect their 
own taxes, although this practice does not fall under Kabul 
regulations. 
 
¶8.  (SBU) Comment:  In a province as poor as Farah, where 
poppy is the most viable and profitable crop, greater central 
government attention to economic development will be required 
if the province is to develop a real economy.  Smuggling and 
the use of the Iranian currency hinders establishment of a 
local economy tied to the rest of Afghanistan.  For the 
foreseeable future, the Iranian economy will therefore likely 
continue to serve as a life line for the province.  On the 
positive side, Farah is one of five provinces where the 
Governor has initiated governor-led eradication -- 60 
hectares of poppy have been eradicated to date.  Embassy and 
PRT will encourage the Governor to take advantage of more 
anti-poppy programs, such as the message multiplier program 
during the pre-planting campaign next fall.  USAID has 
requested supplemental funding for Alternative Livelihoods, 
some of which could possibly go to Farah.  We will continue 
to encourage Farah to access substantial funds that are 
unallocated but available through the Counter Narcotics Trust 
Fund for Alternative Livelihood activities.  End Comment 
NEUMANN