VZCZCXRO1755
PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #0253/01 0341341
ZNR UUUUU ZZH
P 031341Z FEB 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 7123
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0723
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 000253 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS AID/ANE 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS OPIC FOR ALDONAS 
DEPT PASS TDA FOR STEIN AND GREENIP 
USOECD FOR ENERGY ATTACHE 
CENTCOM FOR CSTC-A 
NSC FOR JWOOD 
TREASURY FOR MHIRSON, ABAUKOL, BDAHL, AND MNUGENT 
OSD FOR SHIVERS 
COMMERCE FOR HAMROCK, DEES, CHOPPIN, AND FONOVICH 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958 N/A 
TAGS: EAID ETRD EINV ECON ENRG EFIN AF
SUBJECT: DONORS CONSIDER AFGHAN COMMERCE MINISTER'S AID REQUEST 
 
REF: KABUL 64 
 
¶1. (SBU) Summary.  Afghan Commerce Minister Shahrani January 27 
briefed donor reps on his policy vision and requests for assistance. 
 Shahrani said his highest priorities are trade facilitation, 
corporatizing the state-owned fuel importer FLGE, building capacity 
in his ministry, including a new Policy Analysis Unit, and 
establishing an independent Industrial Parks Authority.  Donors 
broadly welcomed Shahrani's reform agenda.  They subsequently 
discussed a joint response regarding their plans to support it and 
held an initial follow-up meeting with the minister, including on 
ways to coordinate support.  Initial indications suggest greater 
donor interest in supporting his trade-related agenda and less for 
his administrative reform plans.  In a very positive development, 
Shahrani also announced the firing of Engineer Rozi, the reputedly 
very corrupt director of FLGE.  End Summary 
 
¶2. (U) Minister of Commerce and Industries Wahidullah Shahrani 
January 27 presented Kabul-based donor representatives his policy 
vision and requests to donors for assistance to help him achieve it. 
 The USG was represented by USAID Mission Director, EconCouns and 
Assistant Finatt.  Shahrani's vision comprises three broad themes: 
trade policy, private sector development (PSD), and administrative 
reform and capacity building at MOCI.  (Note: Post has forwarded 
Shahrani's Power Point presentation to Washington agencies so this 
cable will not describe it in detail.)  The minister reiterated that 
the private sector must be the primary engine of Afghanistan's 
economic growth and that he seeks to limit MOCI's role to policy and 
regulatory matters. 
 
FLGE PRESIDENT DISMISSED 
 
¶3. (SBU) Shahrani cited as evidence of his commitment to implement 
reform, fight corruption, and take political risks the firing 
January 25 of Engineer Rozi, the reputedly very corrupt director of 
the Fuel and Liquid Gas Enterprise (FLGE), the state-owned fuel 
importer under MOCI.  Shahrani said President Karzai approved the 
dismissal.  The new head of FLGE is Engineer Noor Mohammad Wafa, 
most recently advisor at the Afghan National Standards Authority and 
FLGE director in 1990-91. 
 
¶4. (SBU) Shahrani said the level of corruption at FLGE was "beyond 
imagination" and that several other officials have also been fired 
and placed on the Interior Ministry's exit-control list to enable 
further investigation.  He said an external audit of FLGE will be 
completed that would produce a report likely to be "explosive." 
Shahrani aims to restructure and corporatize FLGE within six months. 
 (Comment:  Most privatization experts believe that this timeframe 
is very ambitious).  MOCI involvement in FLGE had contributed to 
worsening operations at FLGE; in the future MOCI would not be 
involved in FLGE operations. 
 
¶5. (SBU) Donors welcomed efforts to clean up FLGE.  The U.S. and 
several others cited the importance of full implementation of the 
MOU between the Finance and Commerce ministries on Customs access to 
FLGE operations, an agreed "prior action" for IMF Board 
consideration of the fifth review of the PRGF program.  Shahrani 
said he was committed to the IMF program and that Customs officials 
would have the access they require at border posts.  He also stated 
that the MOCI would be very aggressive in implementing an audit of 
the FLGE.  However, he alluded vaguely to misunderstandings about 
fuel-import operations, and Post has separately learned that he may 
want to renegotiate the MOU.  GIRoA discussions with the IMF on this 
issue concluded February 2 and will be reported septel. 
 
AN AMBITIOUS REFORM PROGRAM 
 
¶6. (SBU) Shahrani admitted that his reform program is ambitious.  In 
response to a donor's question, he said his highest priorities are 
trade facilitation, corporatizing FLGE, building capacity in MOCI, 
and establishing an independent Industrial Parks Authority.  He also 
said creating a Policy Analysis Unit in MOCI is an urgent priority. 
Regarding the deadlines for various commitments given in the 
presentation, he clarified that the clock will start ticking when 
donors mobilize the related technical assistance for each measure. 
 
KABUL 00000253  002 OF 002 
 
 
Shahrani said he hopes for a collective response from donors to his 
appeal for assistance. 
 
¶7. (SBU) On trade policy, Shahrani said the GIRoA has failed to 
brief Parliament on the benefits of WTO membership and other 
ministries on Afghan obligations under SAFTA.  Now MOCI will take 
the lead.  He stated that the delayed Memorandum of Foreign Trade 
Regime will be submitted to the WTO in February.  He also noted that 
he would travel soon to Islamabad and would raise the need to start 
bilateral negotiations on a new Pak-Afghan Transit Trade agreement. 
On the need for administrative reform, he described MOCI's current 
capacity as "very disappointing."  He aims to attach 1-2 young 
Afghan counterparts, probably recent graduates trained at Indian 
universities, to each foreign consultant to build ministry capacity. 
 This new cadre will grow into the professional core of MOCI. 
 
DONORS BEGIN DISCUSSING A RESPONSE 
 
¶8. (SBU) At the January 27 meeting, donors welcomed Shahrani's 
appointment and expressed broad support for his reform agenda.  In a 
follow-up meeting chaired by the World Bank January 29, donor reps 
began discussing specific elements of the proposal and types of 
support each might be able to extend.  USAID reps expressed interest 
in a U.S. lead role on trade issues and said ongoing and forthcoming 
programs would address both the trade and PSD elements and include 
capacity building as a cross-cutting theme.  Several other donors 
also said they would be active on trade.  Fewer showed interest in 
Shahrani's administrative reform agenda, though the UK undertook 
quickly to deploy 2-4 experts to develop a "business plan" for 
reform of MOCI that could be the first step in this process.  This 
effort could inform possible follow-up, including on Shahrani's 
goals of establishing Policy Analysis and Project Implementation 
units within MOCI.  Donors reps also agreed to continue efforts to 
coordinate their activities. 
 
¶9. (SBU) Donor reps met again with Minister Shahrani February 2 and 
presented their joint response to his request for technical 
assistance.  Donors mainly described how existing or planned 
programs would support his priorities, but also how the UK-supported 
business plan could guide additional cooperation.  Regarding donor 
coordination, Shahrani expressed preference for assigning one "lead 
donor" to manage all donor assistance provided to each of the 
affected MOCI departments, e.g. Trade, PSD, etc.  Donors explained 
that this would be difficult as several donors hope to contribute to 
each of these areas and because many of the areas are 
interconnected.  The donors looked to Shahrani to lead all donor 
efforts in order to avoid duplication and maximize resources, and he 
agreed to take responsibility.  He suggested monthly meetings at 
technical level, quarterly monitoring and progress meetings, and 
semi-annual meetings at mission-director level to iron out any 
issues.  Donors also urged a streamlining of the many GIRoA bodies 
involved in PSD.  Shahrani reiterated his appeal for temporary 
salary support for Afghan mentees as part of all TA programs.  He 
also said MOCI would agree to specific policy reform benchmarks 
under donor-funded TA programs. 
 
COMMENT 
 
¶10. (SBU) With good reason, donors are excited about the energetic 
and reformist approach the new Commerce Minister is taking.  That 
said, experienced observers have advised against letting 
expectations get too high.  Similar reform agendas have been 
launched by past Commerce Ministers with scant result.  As one 
veteran Afghan hand noted, Shahrani starts not with a tabula rasa 
but a very unreformed ministry in MOCI.  Donors too have a ways to 
go to achieve the degree of coordination of their advice and 
assistance that Shahrani seeks, especially on trade issues. 
Shahrani has made a promising, ambitious start.  The USG should 
support his efforts, while recognizing that even the best intentions 
on his and his international partners' parts may not be able to 
fully achieve the MOCI's ambitious agenda in the short term. 
 
WOOD