VZCZCXRO5863
RR RUEHPW
DE RUEHBUL #1602/01 1810943
ZNR UUUUU ZZH
R 290943Z JUN 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 4520
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 001602 
 
DEPARTMENT FOR SCA/FO, SCA/A, EUR/RPM 
NSC FOR WOOD 
OSD FOR WILKES 
CENTCOM FOR CG CSTC-A, CG CJTF-101 POLAD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV ECON ETRD AF TI
SUBJECT: KUNDUZ PROVINCE: INCREASED TRADE AND IMPROVED SECURITY 
DRIVE ECONOMIC GROWTH 
 
REF: Kabul 841 
 
¶1. (SBU) Summary: Private sector activity, spurred by trade across 
the new Afghan-Tajik bridge, and improved security are driving 
economic growth in Kunduz.  Security has benefited from improved 
Afghan army and police capabilities, institutionalized co-operation 
amongst the security forces and a temporarily reinforced Provincial 
Reconstruction Team (PRT).  However, limited governance capacity, a 
lack of reliable energy, and inconsistent application of the rule of 
law prevent greater growth.  It is important that the stabilizing 
reserve force and army and police mentoring functions remain. 
 
Afghan-Tajik Bridge Brings Economic Growth 
------------------------------------------ 
¶2. (U) Kunduz has benefited from the seven-fold increase in traffic 
across the Afghan-Tajik bridge.  Multiple gas stations and hotels 
have sprung up throughout the city to cater to increased vehicle 
traffic.  Kunduz's central business district has grown with new 
business improvement projects.  The city hosted an agriculture fair 
June 19-21 that included a delegation of 50 Tajik businesspeople. 
The successful and secure event underlined the region's potential 
for trade and the Afghan government's ability to provide security 
for an event that approximately 20,000 people attended. 
 
¶3. (U) Nowhere is the growth and dynamism more palpable than at the 
border city of Sher Khan Bandar.  The European Commission will 
complete the construction and re-location of the Commercial Customs 
facility from Kunduz to Sher Khan Bandar by the end of 2008.  An 
Afghan private investor has committed to investing USD 1.5-5 million 
for a 1600-shop bazaar in a public-private partnership.  Finally, 
the Chinese government announced in May 2008 its plans for a USD 3 
billion rail-line from Sher Khan Bandar as part of the Aynak Copper 
Mine project. 
 
Afghanistan-Tajikistan Cooperation 
---------------------------------- 
¶4. (U) In January 2008, Afghanistan and Tajikistan reached an 
agreement to facilitate the issuance of vehicle road passes for the 
two countries.  In March, the two countries announced an inter-state 
bus service from Kunduz to Dushanbe.  Discussions are on-going for 
the establishment of a Tajikistani consulate in the province.  An 
energy agreement is currently in place, but Tajikistan's irregular 
winter production led to a three-month hiatus in electricity exports 
to Kunduz.  Kunduz currently has no large-scale independent electric 
generation capacity. 
 
Security Improvements 
--------------------- 
¶5. (SBU) The U.S. and German militaries provide continual mentoring 
and training to the Afghan National Army (ANA) and Afghan National 
Police (ANP).  The Focused District Development (FDD) program 
included Chaha Dara district's ANP in the first round of training 
and in July, Emam Sahib is slated to be trained as part of FDD Cycle 
¶4.  The ANA will field a new brigade in Kunduz in 2009.  Improved 
ANA and ANP capabilities, as well as their ability to operate with 
one another, are evident in the joint and Afghan-only operations 
conducted in the province.  Finally, the temporary reinforcement of 
the PRT with a 200-person German airborne company allowed the PRT to 
regain the initiative against insurgent attacks (reftel). 
 
Governance: Lacking Planning and Project 
Management Expertise 
-------------------- 
¶6. (U) Kunduz's provincial government continues to garner 
credibility and legitimacy while delivering services to the 
population.  However, it continues to be limited in its planning and 
project management capabilities.  The provincial government does not 
have a master plan for development of Sher Khan Bandar, for example, 
and a disagreement between Customs and the Afghan Border Police on 
the operation of the border-crossing point has been submitted to 
Kabul for resolution after the two parties were unable to agree on a 
plan locally.  The business community also suffers from the 
government's lack of understanding for the private sector and 
irregular application of governmental regulations.  Kunduz's 
recently arrived prosecutor has already made inroads in cleaning up 
administrative corruption. 
 
Reconstruction and Development 
------------------------------ 
 
KABUL 00001602  002 OF 002 
 
 
¶7. (SBU) Reconstruction activity remains civilian-led; the largest 
donors are the German Ministry for Economic Co-operation and 
Development and USAID.  Afghan and international governmental and 
non-governmental organizations are active throughout the province. 
German development workers live and work in Kunduz city separate 
from the PRT.  The U.S.-funded Keshem-Feyzabad road in Badakhshan 
province will link Badakhshan's capital, Feyzabad, with Kabul via a 
paved road through Kunduz. 
 
¶8. (U) In Kunduz, economic development and growth is occurring 
thanks to the investments that the international community has made 
in roads and bridges.  If the energy piece can be solved, Kunduz 
will be well on its way to sustained economic growth. 
WOOD