VZCZCXRO2213
RR RUEHLN RUEHSK RUEHVK RUEHYG
DE RUEHDBU #0230/01 0561511
ZNR UUUUU ZZH
R 251511Z FEB 09
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0075
INFO RUCNCIS/CIS COLLECTIVE
RUEHIL/AMEMBASSY ISLAMABAD 0004
RUEHBUL/AMEMBASSY KABUL 0016
RUEHNE/AMEMBASSY NEW DELHI 0014
RUEHBJ/AMEMBASSY BEIJING 0004
RUEAIIA/CIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHDBU/AMEMBASSY DUSHANBE 0108

UNCLAS SECTION 01 OF 02 DUSHANBE 000230 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR SCA/CEN 
 
E.O. 12958: N/A 
TAGS: ECON ECPS PGOV ELTN TI
SUBJECT: GOVERNMENT WORKS TO CRUSH FEW BRIGHT SPOTS IN ECONOMY 
 
DUSHANBE 00000230  001.2 OF 002 
 
 
¶1. (SBU) Summary: The poorest of the former Soviet republics, 
Tajikistan's development indicators wallow near the bottom of 
international rankings.  Its agriculture is antediluvian; its 
infrastructure is inadequate; its heavy industry is heavily 
subsidized.  There are nevertheless a few precious sectors of 
the economy that have bucked the trend, showing signs of 
responsiveness and ingenuity benefitting both businesses and 
consumers alike.  Among these are mobile telecommunications, 
where Tajikistan has been a regional leader, and transport, 
where cheap and efficient private minibuses complement 
Dushanbe's dilapidated city transport structure.  In past weeks, 
however, the government has deliberately sought to dismantle the 
achievements in both of these sectors, under the patently 
ridiculous claim of improving service.  The phenomenon is 
unfortunately a familiar one here: government officials view 
successful businesses as sources of personal enrichment.  While 
the latest government efforts to colonize successful business 
sectors are deeply unpopular, Tajiks appear resigned to the 
situation.  End summary. 
 
¶2. (SBU) The Tajik economy is in many ways undeveloped, or even 
backward.  As much as half of the country's meager domestic 
energy production is diverted to a Soviet-built aluminum smelter 
which, thousands of mountainous miles away from both inputs and 
markets, exists only because it pays next to nothing for the 
government-subsidized power it consumes.  While the plant's 
profits flow offshore to undisclosed accounts reputedly operated 
by high-level government officials, the country's population 
shivers through the winter with little or no electricity. 
Tajikistan's second major export, raw cotton, is produced on the 
backs of farmers and students who receive little or nothing for 
their labor while cotton financers use dodgy loans from 
government accounts to guarantee a profit on "their" investment. 
 Meanwhile, the country's infrastructure receives scant 
attention: the road connecting Tajikistan's two main regions, 
still a tortuous mountain track in many places, is only being 
rebuilt because the Chinese government is footing the bill. 
 
Mobile Phone System One of Few "Golden Eggs" in Tajik Economy~ 
 
¶3. (SBU) Despite the overall dismal picture, there are a few 
areas of Tajikistan's economy that genuinely work.  Two of these 
are mobile telecommunications and public transport.  Unlike many 
of its neighbors, Tajikistan's mobile communications sector is 
responsive, efficient, and reasonably priced.  When other 
countries in the region put strict limits on mobile providers, 
including extremely expensive operating licenses, the Tajik 
government opened its market to a multitude of providers, who 
could enter relatively cheaply and without burdensome 
regulation.  As a result, the country currently has ten 
operators, compared to just half that number in the far larger 
neighboring countries of Uzbekistan and Kazakhstan.  The 
competition has generally kept prices low and services 
competitive.  As a result, this country of 6 to 7 million people 
has nearly 3.5 million mobile phones, and vast areas that never 
had a reliable link to the outside world now receive wireless 
signals. 
 
...So Government Decides to Eat Goose 
 
¶4. (SBU) Last week a government bill emerged, with no publicity, 
calling for the establishment of a government-controlled "single 
switching center" through which all international mobile 
communications would have to be routed.  The bill offers scant 
justification for the new center, employing only vague language 
about "defending the security of information space" and 
"protecting socio-economic activity."  According to Gafur 
Irkaev, the head of the Association of Mobile Operators of 
Tajikistan the bill is in fact little more than a power grab by 
state-owned Tajik Telecom, which is looking to become a 
communications monopoly.  Although he suspected that President 
Rahmon himself is not part of this contingent, he said they may 
already have the President's ear, judging by a speech he 
delivered in January, where he excoriated the country's cellular 
operators for getting rich while Tajikistan's energy projects 
are desperate for funding. 
 
¶5. (SBU) According to Irkaev, the government bill is doubly 
disingenuous.  First, it violates existing legislation 
"forbidding unions of legal entities and governments with the 
aim of monopolizing the production or sale of goods, giving the 
current government authority that may have the effect of 
restricting competition..." Second, the government already had 
all of the tools it needed to investigate any concerns about 
 
DUSHANBE 00000230  002.2 OF 002 
 
 
unauthorized use of the mobile phone network, whether for 
terrorism or any other purposes.  The mobile phone companies 
maintain lists of subscribers, including all incoming and 
outgoing traffic, which the government has the right to peruse 
upon request.  Irkaev asserted that a government-run center 
would actually worsen the situation, since its records 
maintenance was likely to be far worse than that of the existing 
private operators. 
 
¶6. (SBU) According to Irkaev's deputy Ulugbek Zoirov, the fact 
that the government does not have a legal or rational leg to 
stand on explains why the bill was assembled in secrecy, without 
consulting the organizations it would regulate.  Nearly three 
years ago a similar proposal was mooted, only then the idea was 
shopped around to various companies and other experts for their 
opinions.  The government ultimately sought the advice of the 
World Bank, which responded that a single switching center was a 
bad idea, and the proposal was dropped.  This time the 
Association of Mobile Operators of Tajikistan only caught wind 
of the bill by accident.  This has fueled the theory that the 
new legislation is simply a thinly-concealed effort by Tajik 
Telecom to monopolize the market. 
 
Transport System Ain't Broke... 
 
¶7. (U) Dushanbe's city-run transportation system, while it runs 
reasonably well in the center of town, is generally inadequate 
in outlying areas.  City buses operate on only a few major 
routes, and the vans that service residential areas are cramped, 
doddering, and infrequent.  Beginning two years ago the 
situation began to improve, however, when Chinese-made minivans 
known informally as "Tangems" began plying the city's transport 
routes.  The Tangems, which are slightly more expensive than the 
city-run transport (about 26 U.S. cents vs. 16 U.S. cents), have 
markedly improved Dushanbe's transportation situation.  Although 
somewhat cramped, the 7-passenger Tangems nevertheless provide 
fixed seating for their passengers, unlike the city vans, which 
will squeeze passengers on top of one another in order to 
maximize riders.  Most importantly, the Tangems go everywhere in 
the city, even altering their routes if passengers request. 
 
...But Government Still Wants to "Fix" It. 
 
¶8. (SBU) Despite the obvious advantages the Tangems bring to 
Dushanbe, the city government has been steadily chipping away at 
them.  First, Tangems were prohibited along the city's central 
street at the end of 2007.  Then, earlier this month, Tangems 
were also outlawed on Somoni Avenue, the main thoroughfare 
linking central Dushanbe with most of the city's residential 
districts.  The government provided very little explanation for 
the new rules, noting only that it sought to "raise the quality 
of passenger service on public transport."  There are reports, 
however, that Dushanbe Mayor Ubaidullaev has contracted with 
Russian companies to buy 150 buses for $4 million that will 
operate on Somoni and Rudaki Streets.  City bus services 
reportedly bring in $500,000 a month; it is commonly assumed 
that the Mayor's office sees a profit from the operations. 
 
¶9. (U) As a result of the prohibition, the commute for many city 
residents has again become complicated.  The city's roughly 
5,500 Tangem drivers have been scrambling to put together new 
routes that do not take them through the prohibited areas. 
Those who do try to challenge the new ordinance are pulled over 
and harassed by the city's omnipresent and fabulously corrupt 
traffic police.  As one driver put it, "Please explain to me the 
logic of this decision.  We are in the middle of a financial 
crisis, and the government's response is to take jobs away from 
its citizens by 'fixing' something that isn't broken." 
 
¶10. (SBU) Comment: Officials looking for quick profits appear 
not to understand, or care, that they are destroying stable, 
long-term sources of revenue.  Tangem operators bring in 
hundreds of thousands of dollars in annual revenue in customs 
duties and registration fees; mobile phone companies pay even 
more in taxes and fees for access to the national telephone 
grid.  Since it has so far provided very little explanation for 
its actions, it is not clear whether the government's recent 
moves are deliberately predatory or merely foolish.  End comment. 
JACOBSON