P 051255Z AUG 08
FM AMEMBASSY KABUL
TO SECSTATE WASHDC PRIORITY 5022
INFO DEPT OF TREASURY WASHINGTON DC 0655
AFGHANISTAN COLLECTIVE
NATIONAL SECURITY COUNCIL WASHINGTON DC
CIA WASHINGTON DC
DIA WASHINGTON DC
DEPT OF COMMERCE WASHINGTON DC

UNCLAS KABUL 002066 
 
 
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E.O. 12958 N/A 
TAGS: EAID ECON PREL PHUM ENRG EAIR AF
SUBJECT: Afghan President's Incoming Senior Economic Advisor 
Promises Reformist Approach 
 
¶1.  [U]  Not for Internet distribution. 
 
¶2.  [SBU]  Summary.  Officers of the Economic Section met July 28 
with Omar Zakhilwal, currently CEO of the Afghanistan Investment 
Support Agency, who is slated to become Afghan President Hamid 
Karzai's senior economic advisor, to replace Ishaq Nadiri.  Like 
Nadiri, Zakhilwal has earned a Ph.D. degree in Economics; unlike 
Nadiri, he appears to believe in the free-market system, which bodes 
well for policy formulation and the Embassy's dealings with him. 
Zakhilwal acknowledges the difficulties he will face in moving 
forward on a reform agenda in the coming year prior to national 
elections, but is optimistic that a rumored change in key ministers 
will help unstick a stalled economic agenda.  End summary. 
 
¶3.  [U]  In late June, reports started coming out of the 
always-active Afghanistan rumor mill that Omar Zakhilwal, currently 
Chief Executive Officer of the Afghanistan Investment Support Agency 
(AISA), would become Afghan President Karzai's new senior economic 
advisor, replacing Ishaq Nadiri.   AISA - the organization which 
licenses all foreign direct investment and all substantial domestic 
investment - is well known to the Embassy, and the Economic Section 
has met and consulted with Dr. Zakhilwal and his organization often 
during the past few years.  We used the new EconCouns' arrival at 
post to explore Zakhilwal's plans in his new position. 
 
¶4.  [U]  Zakhilwal was enthusiastic about his impending confirmation 
by the Cabinet as President Hamid Karzai's senior economic advisor. 
He portrayed himself as a "strong advocate of the free market" and 
of the private sector, noting that he viewed the role of government 
as giving "this nascent free-market economy the space to flourish." 
He noted - as have we - that several Ministers were not supportive 
of the free market, recalling a time last fall when the President 
ordered the Attorney General and the Minister of Interior to control 
prices of foodstuffs.  Because that action is not supported by 
Afghan law, it was quickly rolled back, after Zakhilwal showed 
Karzai that Afghan inflation was largely imported (and after the 
Embassy and the IMF, possibly among others, complained to the Karzai 
Administration).  However, food stores and warehouses in several 
cities were raided and businesses had their stocks impounded before 
the government let it be known that it had no legal basis to enforce 
price controls. 
 
¶5.  [U]  Zakhilwal was also eager to talk to us about some of his 
preliminary ideas for how his office would be structured.  He 
described an ambitious terms of reference he hopes President Karzai 
will approve, and said he will also seek the latter's concurrence in 
making his office a decision-making body.  If Karzai approves, he 
would have within his office a policy analysis/policy formulation 
unit, as well as a unit whose focus is to "enable" the private 
sector. 
 
¶6.  [SBU]  Zakhilwal views his future position as being "30-40 
percent in the service of the private sector."  In his view, his 
role at AISA provided him a unique perspective (for a government 
official) on impediments to business in Afghanistan.  He noted that 
while he was not in a position to set economic policy at AISA, he 
hopes soon to be able to combat both procedural problems and the 
problematic mindsets of those, including ministers, who don't trust 
the free market.  The procedural problems he mentioned have largely 
to do with laws/regulations that need either to be eliminated - such 
as the mortgage tax and import duties on manufacturing machinery -- 
or passed (septel).  As an anecdote about mindsets, Zakhilwal 
recounted that 5-6 years ago, if his father in Jalalabad (Nangarhar 
province of Afghanistan) wanted to call him, he had to travel to 
Peshawar (Pakistan) to use a telephone company kiosk.  Now, almost 
everyone has a cell phone, rates are affordable, and the mobile 
telephone companies are adding tens of thousands of new subscribers 
monthly.  Nevertheless, according to Zakhilwal, the Minister of 
Commerce and Industry is among those complaining that the mobile 
telephone companies' shareholders are "enriching themselves." 
 
¶7.  [U]  EconCouns asked Zakhilwal how he intended to engage with 
the Afghan private sector and whether the government could enlist 
the help of the private sector in setting policy.  Zakhilwal 
described debilitating factional rivalries among chambers of 
commerce and implied that the private sector here was not yet 
competent enough to provide advice.  He noted, though, that except 
for some financial laws, the government rarely consulted 
stakeholders in the lawmaking process. 
 
 
¶8.  [U]  During the coming year, Zakhilwal saw the problems of job 
creation and high food prices as those that would most challenge the 
government.  He said the government had to do a better job about 
communicating its achievements.  He noted that the Taliban had done 
a good job in communicating the perceived failures of the 
government, with the result that most Afghans believe that "billions 
of dollars have been wasted."  He called upon the government - or 
himself, in his upcoming role - to publicize its "soft 
achievements," such as the improved road system (a once hard 12-hour 
trip from Kabul to the border post in Jalalabad now only takes two 
hours on a smooth road) and mobile telephony.  He seemed optimistic 
about his ability to positively affect economic laws and 
regulations, and is full of energy and ideas - about which he will 
invite Embassy input - for his role as economic advisor. 
 
¶9.  [U]  Biographic information:  Omar Zakhilwal emigrated to Canada 
from a refugee camp in Peshawar, earning a Ph.D. in Economics 
(Carleton University, Ottawa, Canada), where he taught for a period 
of time.  Returned to Afghanistan in 2002.  Before becoming AISA 
CEO, Zakhilwal served as the Chief Policy Advisor at Afghanistan's 
Ministry of Rural Rehabilitation & Development.  Zakhilwal has been 
a member of the Supreme Council of Da Afghanistan Bank 
(Afghanistan's Central Bank) and teaches Economics at Kabul 
University.  Married with one son born about 2003; his family lives 
with him in Kabul.  Was previously offered several positions in the 
government including Deputy Minister of Commerce and Deputy Minister 
of Interior, but declined.  Sees himself as an academic; claims no 
business interests of his own.  Ethnicity: Pashtun from Jalalabad, 
Nangarhar province.  Speaks excellent English.