VZCZCXRO1877
RR RUEHLN RUEHVK RUEHYG
DE RUEHDBU #1163/01 2281043
ZNR UUUUU ZZH
R 161043Z AUG 07
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0780
INFO RUCNCIS/CIS COLLECTIVE
RUEAIIA/CIA WASHDC
RUCNDT/USMISSION USUN NEW YORK 1500
RUEHVEN/USMISSION USOSCE 2025
RUEHBS/USEU BRUSSELS 1254
RUEHBUL/AMEMBASSY KABUL 2224
RUEHNE/AMEMBASSY NEW DELHI 2191
RUEHIL/AMEMBASSY ISLAMABAD 2229
RUEHDBU/AMEMBASSY DUSHANBE 2613

UNCLAS SECTION 01 OF 02 DUSHANBE 001163 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/CEN 
 
E.O. 12958: N/A 
TAGS: PGOV ECON TI
SUBJECT: TAJIKISTAN'S SUGHD REGION HAS HIGH POTENTIAL, BUT LIMITED BY 
TRADE BARRIERS AND CORRUPTION 
 
 
DUSHANBE 00001163  001.2 OF 002 
 
 
¶1.  SUMMARY:  The great potential of northern Tajikistan's Sughd 
Region -- as well as the enormous challenges it faces -- were on 
full display during PolOff's August 12-13 visit to Khujand, 
Istaravshan and Konibodom.  The region's reputation for economic 
dynamism and entrepreneurship appeared justified by the high 
level of commercial activity.  In addition, PolOff met with an 
impressive youth activist committed to promoting democracy and 
justice in his country.  However, it was also clear that several 
serious roadblocks will continue to limit the region's economic 
and political development.  These include such common problems 
as power shortages, poor relations with Uzbekistan, and 
corruption, as well as uniquely local issues such as the threat 
to agricultural production caused by water seepage from Sughd's 
Kairokkum Lake. END SUMMARY. 
 
¶2.  Ten kilometers east of Khujand, PolOff met with Rafik 
Sattorov, chairman of "Sharbati Kistakuz," a fruit processing 
plant producing everything from tomato sauce to apricot juice. 
The factory is reportedly Tajikistan's oldest, and employs 600 
workers on a seasonal basis.  Sattorov was proud of the success 
he had achieved, and enthusiastic about his plans for the 
future.  He intends to substitute durable "tetrapacking" in 
place of the glass bottles currently used, to facilitate export 
to Russia and Kazakhstan.  Moreover, he has signed a memorandum 
of understanding with a Chinese company to buy equipment for an 
entirely new facility that will produce high quality window 
glass for the domestic market at a fraction of the current 
price. 
 
¶3.  The same energy symbolized by Sattorov in the business 
sector was evident during PolOff's meetings with local civil 
society leaders.  Abdusamad Sultonov, executive director of the 
Social Institute Youth and Civilization (SIYC) -- a recipient of 
U.S. Democracy Commission funding -- spoke fervently about a 
number of projects his organization has run over the past year 
with the goal of increasing youth participation in public life. 
For example, SIYC ran an advocacy campaign prior to the November 
2006 elections, publicizing the legal right of Tajikistan's 
citizens to obtain demonstration permits.  The group also runs a 
resource center providing training in human rights defense to 
lawyers, journalists, and aspiring politicians, and led a recent 
campaign in support of a young local judge, who was removed from 
his job and arrested -- apparently for purely political reasons. 
 This effort included five articles published in regional and 
national newspapers which, while not resulting in the judge's 
reinstatement, at least secured his freedom. 
 
¶4.  A discussion of economic issues with Istaravshan Deputy 
Chairman Dilovar Azimov not only underscored the disastrous 
economic impact of the Soviet Union's collapse and years of 
civil war, but also highlighted the local government and 
business community's ability to make the most of a bad 
situation.  Although Istaravshan's once thriving tourism 
industry has all but collapsed and the city's four carpet 
factories are closed, the news was not all bad: a food 
processing facility is now exporting its products to Kazakhstan, 
Russia, and Belarus; and two local wineries have benefited from 
a significant rise in demand from Russia following that 
country's ban on the import of Georgian wine.  Azimov also noted 
that favorable tax policies have attracted a large number of 
businesses to the city.  Thus, rather than merely seeking to 
revive Soviet-era industry, Istaravshan is aggressively pursuing 
new avenues of growth.  At the same time, however, chronic power 
shortages continue to limit economic development, as do 
Tajikistan's poor relations with Uzbekistan.  For example, 
Istaravshan's wine and mineral water producers (including "Obi 
Zulol," a recipient of significant U.S. and other foreign 
investment) cannot access Uzbekistan's 30 million potential 
customers due to trade restrictions. 
 
¶5.  Konibodom Deputy Chairman Rustam Qodirov described an even 
more serious economic (and environmental) threat.  Water seepage 
from nearby Kairokkum Lake has dramatically raised the water 
table and soil salinity levels, lowering crop yields.  Without 
corrective action, the outcome could be disastrous for the 
area's predominantly agricultural economy.  Yet Qodirov 
estimated that repair of the Soviet-era water pumps designed to 
protect lands surrounding Kairokkum from seepage could cost as 
much as $8.4 million.  The local government does not have the 
resources to address a problem of this magnitude, and Qodirov 
was not confident that he would be able to secure funding from 
the central government. 
 
DUSHANBE 00001163  002.2 OF 002 
 
 
 
¶6.  Ne'matulloh Mirsaidov and Bobojon Ikromov, director and 
editor of Varorud Newspaper -- an organization with a reputation 
for independence and a willingness to criticize the authorities 
-- emphasized that corruption is another factor restricting 
economic development in Sughd.  The men spoke of the 
difficulties of starting a business when there are 58 inspection 
agencies demanding bribes.  They also asserted that the central 
government's ongoing anti-corruption drive is nothing more than 
an excuse to target independent business and political interests 
that might pose a threat to President Rahmon, including the 2006 
dismissal of Sughd's powerful former governor Qasim Qasimov and 
the ongoing criminal investigation of former Sughd legislator 
Nizomkhon Juraev.  In Sughd -- which is geographically separated 
from southern Tajikistan by high mountains, and whose elites for 
decades ruled the Soviet Republic of Tajikistan -- these actions 
are causing unease among independent-minded businessmen, and 
prompting them to protect their money by sending it overseas, 
rather than investing it at home. 
 
¶7.  COMMENT:  Even for a region with as much energy and human 
capital as Sughd, the impediments to operating a business or 
promoting civil society are daunting.  Nevertheless, if 
government interference is kept in check, there is strong reason 
to hope that the population will make steady progress towards 
economic development and political freedom.  On the other hand, 
if Dushanbe continues to tighten its grip over political and 
economic life in the region, Sughd -- along with the rest of 
Tajikistan -- is likely to suffer as a result. END COMMENT. 
JACOBSON