VZCZCXRO1442
PP RUEHDBU RUEHIK RUEHPW RUEHYG
DE RUEHBUL #1934/01 1621236
ZNR UUUUU ZZH
P 111236Z JUN 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8645
INFO RUEATRS/DEPT OF TREASURY WASH DC
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4158

UNCLAS SECTION 01 OF 02 KABUL 001934 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS AID/ANE 
DEPT PASS USTR FOR GERBER AND KLEIN 
DEPT PASS OPIC FOR ZAHNISER 
DEPT PASS TDA FOR STEIN AND GREENIP 
CENTCOM FOR CG CFC-A 
NSC FOR AHARRIMAN 
TREASURY FOR LMCDONALD, ABAUKOL, AND JCIORCIARI 
OSD FOR SHIVERS 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
 
E.O. 12958 N/A 
TAGS: EFIN KCOR KPRV EINV EAID ECON PREL PGOV AF
SUBJECT: AFGHANISTAN - AHADY CONSIDERS A/S SULLIVAN LETTER ON AFGHAN 
ANTI-CORRUPTION STRATEGY AND HESITATES ON PRIVATIZATION 
 
REF: STATE 69427 
 
(U) This message contains SENSITIVE BUT UNCLASSIFIED information. 
Please protect accordingly. 
 
1.(SBU) SUMMARY:  Finance Minister Ahady is reviewing 
anti-corruption proposals for his own ministry, including 
recommendations for the customs department and to set up a ministry 
"hot line."  He expressed appreciation for EB Assistant Secretary 
Dan Sullivan's letter and indicated that he would review the road 
map again before responding.  Ahady complained again about an 
Attorney General investigation of the Roshan tax rationalization 
agreement that Ahady claims increased government revenue from the 
telecommunications sector, even though the Attorney General has said 
that particular investigation has been suspended. (NOTE: Despite 
these assurances, the MOF Director General of Revenue and an advisor 
to Minister Ahady both insist that the investigation into this case 
is ongoing. We will try to clarify. END NOTE.)  Ahady worried that 
reduction of staff in the tax department could prevent the 
government from meeting its IMF revenue targets.  Ahady advised that 
under these circumstances he would be very hesitant to sign 
privatization orders.  If Ahady signs one such order on his desk, it 
would put in motion negotiations that should allow Caterpillar's 
local agent to expand its operations at a time that we expect 
significant growth in the construction equipment sector.  END 
SUMMARY. 
 
 
2.(SBU) On May 26, ECON Counselor delivered reftel letter to 
Minister of Finance Ahady.  He indicated his thanks for A/S 
Sullivan's interest in the topic and commented that he had just 
received a paper from his USAID-funded advisor containing 
recommendations on some steps he could take to address corruption 
issues inside the ministry.  Without going into details, Ahady 
advised that one recommendation was directed at the customs 
department and the second was to establish an anti-corruption hot 
line inside the ministry.  Ahady thought the latter was a good idea, 
but he expressed concern that it could be abused.  ECON Counselor 
suggested that if such a hot-line proved successful for the Finance 
Ministry, the initiative could spread to the rest of the 
government. 
 
3.(SBU)  Ahady said that he had reviewed elements of the road map 
related to public finance, but wanted to go through the document 
another time before responding to the letter.  He noted that 
Afghanistan's real corruption problem was government officials 
taking payment for delivering services.  As examples, he cited 
bribery for issuance of passports and to negotiate reduction or 
elimination of electricity bills, as well as payments to tellers to 
process bank transactions. 
 
4.(SBU) Once again, Ahady complained about harassment by the 
Attorney General's office debilitating his taxation department. 
Prosecutors, he said, had camped out in taxation department offices 
for five months investigating the Roshan tax rationalization 
agreement that Ahady claims increased revenue from the 
telecommunications sector. (NOTE:  Roshan is Afghanistan's largest 
taxpayer. END NOTE.)  Ahady said that due to fear of prosecution, 
office employment had dropped from 35 to 14 employees.  Ahady again 
stressed his worries that the "interference" by the AG's office 
would prevent the finance ministry from meeting the IMF revenue 
targets for this coming year. 
 
5.(SBU)  Post's ROL Coordinator brought this concern to the 
attention of the Attorney General, who responded that this 
particular investigation has been discontinued. In addition, the 
Attorney General advised ROL Coordinator that the General 
 
KABUL 00001934  002 OF 002 
 
 
Independent Administration Against Corruption, led by convicted U.S. 
felon Ezatullah Wasifi, has referred several other cases to the AG 
charging corruption in the MOF, including allegations of malfeasance 
at the highest levels of the ministry. 
 
6.(SBU) Ahady stated that he had a number of privatization orders on 
his desk that he had no intention of signing because he feared that 
the Attorney General might investigate him if a privatization 
auction produced less money than the estimated value of the 
enterprise.  Ahady added that he planned to ask President Karzai for 
authorization to sign the orders or some form of protection against 
possible prosecution.  He speculated that the government would only 
privatize five state-owned enterprises this year instead of 15. 
 
7.(SBU) ECON Counselor pressed Ahady to sign the privatization order 
for the moribund state-owned wool weaving company.  Allied, 
Caterpillar's distributor in Afghanistan, leases land from the wool 
weaving company.  The MOF and Allied have negotiated terms under 
which the lease would be transferred to the finance ministry upon 
signature of the privatization order, and the lease would be 
extended to a 20-year duration.  This would give Allied the time and 
space it needs to expand.  In response, Ahady said the Allied 
situation may need to be handled at the highest level.  Allied has 
estimated that this would pave the way for an additional $2.5 
million investment (the company's current investment is estimated at 
about 7.5 million, including equipment inventories). 
 
8.(SBU) COMMENT: Ahady's policy paralysis on privatization and other 
issues is cause for concern.  At the macro level, the situation has 
implications for revenue collection, budget sustainability, and 
Afghan ability to pay ANA salaries as recruitment levels rise.  At 
the micro level, Ahady's expressed unwillingness to lead is holding 
up the expansion of Caterpillar's agent in Afghanistan at a time 
when the construction equipment market appears set to experience 
significant growth. 
 
WOOD