VZCZCXRO4563
RR RUEHAST
DE RUEHDBU #0050/01 0121114
ZNR UUUUU ZZH
R 121114Z JAN 09
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 1328
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNS/NSC WASHINGTON DC
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC 0107
RUEHAST/USOFFICE ALMATY 0094

UNCLAS SECTION 01 OF 02 DUSHANBE 000050 
 
SIPDIS 
 
STATE PLEASE PASS TO TDA 
AID/W FOR SCAA/FLYNN FULLER 
USDOC FOR 3131/ANESA 
ALMATY FOR USAID 
 
E.O. 12958:  N/A 
TAGS: EAID ECON EFIN EAGR ELTN TI
SUBJECT:  Mission Economic Growth and Development Goals 
 
¶1. Introduction and Summary: A recent review of the Mission 
Strategic Plans provided a good snapshot of what we achieved in the 
last year and our top priorities looking ahead. This is the second 
cable to provide a goal by goal look of what Embassy Dushanbe is 
doing. Work towards the Economic Growth and Development Goal is 
coordinated by the Development Assistance Working Group (DAWG) which 
includes the DCM, USAID, POL/ECON, Public Diplomacy, INL, and the 
Office of Defense Cooperation.  Key priorities are support for small 
and medium enterprises, energy sector development, promoting 
regional and international trade and investment links, agriculture 
sector reform, legal and regulatory reform and transportation 
infrastructure development. Key accomplishments in 2008 included a 
moratorium on inspections of small and medium business, the 
establishment of an American Chamber of Commerce, the passage of 
land-related legislation and productivity boosting assistance to 
farmers.  Increased use of the U.S.-built bridge to Afghanistan at 
Nizhniy Pyanj improved trade and local transport links. Tajikistan 
experienced solid growth in a several economic indicators this year 
including trade and tax revenue, but this growth was supported 
mainly by strong growth in labor migration and remittances. With 
Russia's financial crisis reducing remittances, Tajikistan faces a 
difficult 2009. A key challenge will be supporting economic growth 
despite falling remittances. End intro and summary. 
 
Key accomplishments in 2008 
 
 
¶2.  In the trade and business climate we made progress in several 
areas. With Mission support, businesses with U.S. ties established 
an American Chamber of Commerce to advocate for business and trade 
reforms. With Mission advocacy, the government announced a two-year 
moratorium on inspections of small and medium enterprises. We 
supported an agricultural trade fair in Kunduz, Afghanistan for 
Tajik participants. We held the regional TIFA Council Meeting in 
Dushanbe and followed up on key points from the consultations. The 
Mission sponsored a speaker on tourism development who received 
strong press coverage and developed a non-paper of recommendations 
for Tajik tourism development. We worked with the Ministry of 
Economic Development and Trade (MEDT) to reactivate dormant WTO 
accession negotiations, providing expert advice and technical 
assistance in completing and submitting replies to the current round 
of questions from the WTO Working Group members.  As a result, 
Tajikistan was scheduled for a new Working Group meeting in late 
¶2008.  We promoted sustainable fiscal capacity at the Finance 
Ministry, which revised the budget presentation format to be a more 
effective management tool reflecting international best practice. We 
strengthened the microfinance sector through capacity building in 
the Association of Microfinance Organizations of Tajikistan. 
 
¶3. Agriculture is key to improving growth and economic security. In 
January 2008 the government adopted amendments developed with U.S. 
assistance to the Land Code. The changes made it possible to legally 
transfer land use rights for the first time ever. In March 2008, the 
government adopted the new Law on Mortgage and the new Law on the 
State Registration of Immovable Property Rights, developed with U.S. 
assistance.  USAID refocused and expanded agricultural sector 
programs to address better the challenges to food security. We 
Qprograms to address better the challenges to food security. We 
helped farmers manage water and land resources through 26 water user 
associations (WUA) including four new associations in vulnerable 
regions.  These associations reported significant increases of up to 
120% in agricultural productivity, and increased net income because 
of improved water availability, despite drought conditions in 2008. 
 
 
¶4. We saw progress in infrastructure development in energy and 
transportation. In the energy sector the U.S. Trade and Development 
Agency (TDA) agreed to finance a feasibility study on coal mining at 
a key deposit. We provided power system simulation software and 
technical assistance to the national electricity company, which help 
them manage technical losses in transmission and distribution lines 
based on reliable power loss calculations. Tajikistan signed a Power 
Purchasing Agreement with Afghanistan.  In transportation 
infrastructure development we saw trade traffic increase 
considerably with the opening of the U.S.-built bridge at Nizhniy 
Pyanj to both commercial and private traffic, including pedestrians. 
In the aviation sector, through TDA, we supported Tajik 
participation in an international Civil Aviation Conference in 
Athens and supported the sale and lease of Boeing aircraft to two 
local airlines. 
 
Results on Indicators 
 
¶5. In the expectation that economic growth would lead to increased 
tax revenue, we targeted an increase in government revenue at 10%. 
In fact, it increased 21%. For customs revenue due to increased 
 
DUSHANBE 00000050  002 OF 002 
 
 
trade we targeted a 15% increase. According to the State Customs 
Agency, the customs revenues in the first ten months of 2008 
increased 27%. Our target for increased deposits at commercial banks 
was $350 million, while the National Bank of Tajikistan reported a 
$527 million increase as of September 2008. We targeted Tajik-Afghan 
trade to increase 20%, but according to State Statistics Committee 
the Tajik-Afghan Trade turnover increased 200%. While the robust 
growth in these indicators is seemingly a good sign, in fact, the 
driving factor was increased labor migration as living standards 
suffered in a harsh winter, and very high growth in remittances. 
These remittances, rather than domestic developments, supported the 
strong growth in tax revenue, trade volumes, and bank deposits. With 
remittances likely to fall back in 2009 due to the financial crisis 
and lower oil prices, maintaining positive momentum on these 
indicators will be a challenge. Looking to agriculture we targeted a 
reduction in the percentage of farmland used for cotton cultivation 
of 10%.  Despite food shortages and Freedom-to-Farm decrees in 2008, 
242 thousand hectares of land was used for cotton, only 5% less than 
in 2007. There was marginal to no improvement on 
ease-of-doing-business indicators. 
 
Top goals for 2009 
 
¶6. In 2009 the Mission plans to support further trade fairs with 
Afghanistan. We will advocate for an improved Tajik visa regime to 
support trade, investment, and tourism. We will support activities 
of the new American Chamber of Commerce. The Mission will bring in a 
visiting Policy Specialist on Alternative Energy and send a group of 
Tajiks to the United States for an Open World program on alternative 
energy. We will support increased power generation capacity through 
a TDA feasibility study of power projects in the Pamir region. We 
will advocate to advance Regional Power Integration efforts. We will 
work with farmers and the government to carry out land reform 
legislation. We will finish the final elements of the Nizhniy Pyanj 
bridge facilities and to expand traffic over the bridge. We will 
advocate for expanded aviation services in the region and to the 
West and familiarize Tajik officials with the Open Skies Agreement 
concept. We will work with TDA to provide management assistance to 
Tajik Air and Somon Air, and support the operation of PACTEC 
Aviation Service in Kurgan Tube if that moves forward. 
 
New developments and major challenges 
 
 
¶7. The global financial crisis is a new development that complicates 
many things. It has thrown all calculations of remittances, customs 
revenues, overall government revenues, electricity prices and demand 
in Afghanistan and Pakistan, into doubt. With significant numbers of 
migrants returning and needing we will emphasize to the government 
the increased importance of improving the climate for small 
business. 
 
¶8. A multi-year Food-For Peace Development Assistance Program ended 
in 2008 and was not renewed.  This program used food aid to 
encourage rural Tajiks to participate in development activities, 
including maternal and child health programs, nutritional education, 
and agricultural training. Further, the program acted as an 
information network on conditions in rural areas allowing us to 
monitor levels of hardship and anticipate humanitarian emergencies. 
With the end of the program, we risk losing this network, our 
QWith the end of the program, we risk losing this network, our 
ability to provide food assistance, and a way to engage rural 
dwellers in development activity. 
 
¶9.  The failure of Tajikistan to take action to combat money 
laundering maintains an opaque financial system.  The Parliament 
just extended until June, 2009 the property amnesty law for 
legalizing unregistered property which precludes passage of an 
anti-money laundering law in the near term. 
¶9. Other obstacles to promoting economic growth and development are 
pervasive corruption in government, government's slowness to make 
decisions, mistrust of any connections with Afghanistan, cotton 
sector debt which may affect overall agricultural production and 
investment, poor creditworthiness of the government due to the IMF 
misreporting scandal, lack of electricity during the winter and 
spring, and climate change which has led to reduced snowfall and 
lower water flow into reservoirs. 
JACOBSON 
 
 
 
Official Copy - Submitted on: 3/7/2008