VZCZCXRO2600
RR RUEHLN RUEHVK RUEHYG
DE RUEHDBU #1075/01 2310307
ZNR UUUUU ZZH
R 180307Z AUG 08 ZDK
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0916
INFO RUCNCIS/CIS COLLECTIVE
RUEHIL/AMEMBASSY ISLAMABAD 0206
RUEHBUL/AMEMBASSY KABUL 0240
RUEHNE/AMEMBASSY NEW DELHI 0159
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC 0037

UNCLAS SECTION 01 OF 02 DUSHANBE 001075 
 
SIPDIS 
SENSITIVE 
 
DEPARTMENT FOR SCA/CEN 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV PGOV PREL USTR TI
SUBJECT: TAJIKISTAN - PRESIDENT RAHMON LAUNCHES INVESTMENT COUNCIL 
 
¶1. (U) This message is sensitive but unclassified.  Please protect 
accordingly. 
 
¶2. (SBU) Summary: President Rahmon chaired the first ever meeting of 
the Investment Council on July 31.  While much of the meeting was 
dedicated to preliminary organizational matters, the President 
expounded on several topics - not necessarily related to improving 
the investment environment.  However, for this new body to represent 
something more than window-dressing, it must tackle real issues that 
result in positive change to the business environment.  Only then 
will Tajikistan begin to attract the foreign investment the Tajiks 
say they desire, and stimulate private sector development. End 
Summary. 
 
¶3. (U) The Investment Council, an initiative of the European Bank 
for Reconstruction and Development, includes USAID, the European 
Bank for Reconstruction and Development, Tethys Petroleum, the 
National Association of Small and Medium-sized Enterprises, 
President Rahmon, Prime Minister Akil Akilov, Chairman of the State 
Committee on Investments Farrukh Hamraliev, and Mufarah Muhabbatov, 
General Director of a local souvenir producer.  USAID served as the 
representative of bilateral donors (and based on its current 
Business Environment Improvement Project implemented through 
Pragma), while the European Bank for Reconstruction and Development 
represented multilateral donors. 
 
BE VERY VERY NICE TO THE PRESIDENT 
 
¶4. (SBU) Although the launch of the Investment Council was more than 
a year in the making, the European Bank for Reconstruction and 
Development gave just three days advance notice of the first 
meeting, leaving little time to gather the Donor Coordination 
Council to discuss approaches and messages to the Government of 
Tajikistan from the donor community.  On July 29 several non-Tajik 
Government members of the Council held an advance meeting to discuss 
procedures and agenda of the first Investment Council meeting. 
Djoomart Otorbaev, the European Bank for Reconstruction and 
Development Senior Adviser on Investment Climate for Enterprises led 
this preliminary meeting.  Mr. Otorbaev, the former Deputy Prime 
Minister in Kyrgyzstan, has spearheaded this effort in several 
countries in addition to Tajikistan.  Mr. Otorbaev told the other 
members of the Investment Council present that they must create a 
congenial, open atmosphere to keep the President engaged.  They were 
advised not to raise any politically sensitive or controversial 
topics.  The President's opening and closing speeches were already 
prepared, and Council members might have three minutes to say 
something. 
 
¶5. (SBU) Mr. Otorbaev suggested the USAID representative tell the 
President how pleased the donors were to work with him on improving 
the business environment and investment opportunities in Tajikistan. 
 When the USAID representatives suggested it would be more useful to 
raise issues such as the tax code or the rule of law, Mr. Otorbaev 
responded that it would probably be four to five years before those 
subjects could start to be addressed.  The focus was to be on small 
realistic actions aimed at achieving some results quickly. 
 
... CAUSE HE'S FEELING VERY TIRED 
 
¶6. (SBU) President Rahmon, appearing tired and somewhat disengaged, 
began the Investment Council meeting with introductory remarks on 
the need to increase business representatives in the country.  The 
representative of the European Bank for Reconstruction and 
Qrepresentative of the European Bank for Reconstruction and 
Development, Masaru Honma, Director for Central Asia, as well as the 
Chairman of the State Committee on Investments made brief remarks on 
the investment climate and the utility of the Investment Council. 
Honma expressed his hope that the Investment Council would be a 
forum for a frank exchange of views, and approved of the recent 
Government decision to institute a two-year moratorium on 
inspections of small and medium-sized enterprises.  Hamraliev stated 
that political and macroeconomic stability has been achieved and 
that the private sector would be the engine for economic growth.  He 
continued that the economy in Tajikistan was open and would continue 
to become more integrated with the international business community, 
particularly through WTO accession.  While the investment climate 
was improving and the number of investors was increasing, it still 
was not enough. 
 
DAMN FOREIGNERS! 
 
¶7. (SBU) For the first hour, Rahmon appeared to want to just get the 
meeting over with.  However, he eventually came alive, finally 
speaking for over an hour, jumping from one topic to another. 
Rahmon complained about the lack of investment in the cotton sector 
and that the Government had to step up with 120 million somoni 
(approximately $40M) for cotton farmers.  He also complained about 
 
DUSHANBE 00001075  002 OF 002 
 
 
what he considered conflicting messages the international financial 
institutions sent the country, which he said had caused confusion. 
He railed against Uzbekistan, saying they "closed the door this 
year, not even allowing humanitarian aid in."  Rahmon said 
"Tajikistan is one of the most backward countries, and other similar 
countries have received debt forgiveness" (He did not mention the 
latest IMF misreporting scandal, under which Tajikistan became the 
first country known to have received IMF debt relief under false 
pretenses).  Rahmon added that "I don't trust journalists, and the 
internet less so.  Most journalists work for intelligence 
services." 
 
¶8. (SBU) Rahmon raised the case of an international company 
registered in Tajikistan and doing business in Isfara, which was 
caught trafficking narcotics.  "Tajikistan has a lot of cheaters and 
criminals coming.  We must take action against them, but then others 
say that Tajikistan is not favorable to business."  Rahmon also 
talked about tax evaders and how Tajikistan needed to protect 
itself.  On corruption, he admitted it was a problem particularly 
among local officials, but then tried to rationalize it away by 
saying that corruption was a problem throughout the world.  He 
finished with comments on how Tajikistan could help with 
Afghanistan's recovery and development, especially in the areas of 
energy and border trade.  He contrasted these prospects with 
Uzbekistan's obstruction of development in Tajikistan, saying that 
Tajikistan needed transportation alternatives that avoided 
Uzbekistan. 
 
¶9. (SBU) Comment: Despite the President's demonstration of his 
suspicion of foreign involvement in Tajikistan, the Investment 
Council needs to move quickly beyond pleasantries and deal with 
pressing issues that hinder private sector development and foreign 
investment.  If the Investment Council can achieve some initial 
successes that lead to positive reactions and commentary from 
business and donor leaders, it may gain the legitimacy and momentum 
that will allow it to tackle other obstacles.  However, if the 
Investment Council fails to press an agenda of real economic reform, 
it may lose Rahmon's interest and die a quiet death.  With the 
agenda for the next quarterly meeting focused on improving the 
regulatory environment, the Investment Council could achieve gains 
in simplifying the registration of legal entities, such as by 
promotion of "one stop" business licensing.  End Comment.