VZCZCXRO3705
PP RUEHDBU RUEHPW
DE RUEHBUL #0782/01 0891142
ZNR UUUUU ZZH
P 301142Z MAR 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8016
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0763
RUEHBJ/AMEMBASSY BEIJING 4993
RUCNAFG/AFGHANISTAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 KABUL 000782 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS FOR AID/ANE 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS OPIC 
DEPT PASS FOR TDA FOR STEIN AND GREENIP 
USOECD FOR ENERGY ATTACHE 
CENTCOM FOR CSTC-A 
NSC FOR JWOOD 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
 
SENSITIVE 
SIPDIS 
 
E.O.  12958 N/A 
TAGS: EINV EAID ECPS ELTN SENV PHSA ENRG ETRD AF CN
SUBJECT: Are the Chinese Reliable Partners for Afghan 
Reconstruction? 
 
REF: BEIJING 722 
 
¶1. (SBU) Summary and Introduction: In recent discussions with 
Emboffs, Afghan and Chinese officials and international partners in 
Kabul appear optimistic that the Chinese government and Chinese 
state-owned companies working in Afghanistan will fulfill important 
Chinese commitments to Afghan reconstruction.  Chinese firms 
currently have contracts to install a fiber optic cable (USD 69 
million project) through the Afghan government; to construct 150 
kilometers of the Ring Road in the northwest with Asian Development 
Bank funding; to install generators for the Kajaki hydro power plant 
(USAID subcontract); and, in the largest foreign investment project 
in Afghanistan, to develop infrastructure for and eventually to 
exploit the Aynak copper mine (USD 3 billion investment project). 
The Chinese government also provides humanitarian and government 
capacity building assistance. At present, the Chinese are 
proceeding, though slowly, on nearly all of their infrastructure 
commitments, with the notable exception of Kajaki.  International 
partners and Afghan business leaders are concerned about the quality 
of Chinese contractors' work.  USAID reports extensive damage to 
USG-funded portions of the Ring Road by Chinese contract work on the 
fiber optic cable.  Chinese officials say that China is a committed 
partner in Afghan reconstruction, but cite security and supply route 
concerns as major impediments to economic development work here.  It 
remains to be seen if China will follow through on all of its 
commitments to Afghanistan given the current security environment. 
End Summary. 
 
¶2. (SBU) In a March 18 meeting, Chinese Economic Counselor Hu 
Yuanteng told Econoff that the Chinese government is committed to 
Afghan reconstruction and economic development efforts, but 
emphasized that security problems are the main reason China is 
unable to undertake more reconstruction projects here.  Hu noted 
that Chinese companies want to expand into the Afghan market and 
that, since 2003, the Chinese government has encouraged Chinese 
investment in Afghanistan.  However, only six Chinese companies 
currently work in Afghanistan, and, Hu noted, of those six, two 
companies - China Hydro Power Engineering Company and China Railways 
- have stated that they will not start new projects due to security 
problems.  In June 2008, Hu said insurgents kidnapped a Chinese road 
construction engineer in Wardak province.  Hu said that China 
Railways' project to construct part of the Ring Road in Badghis and 
Faryab provinces in the northwest has suffered several roadside 
bombings and three Afghan subcontractors were kidnapped and one was 
shot dead in November 2008.  Hu said that the Chinese government 
will continue to encourage Afghan reconstruction projects among 
Chinese companies; however, the lack of security will remain an 
inhibiting factor in furthering Chinese engagement in economic 
development.  Hu emphasized that the Chinese government has 
increased assistance in humanitarian and social sectors and for 
government capacity building training to USD 200 million. 
 
**************************** 
Aynak Copper Mine:  Security 
Enduring Concern for China 
**************************** 
 
¶3. (SBU) State-owned China Metallurgical Group Corporation (CMIC) is 
progressing slowly in the USD 3 billion Aynak copper mine project, 
the largest foreign investment project in Afghanistan.  In a 
February 10 meeting, Chinese Deputy Chief of Mission Li Bijian told 
Emboffs that China remains committed to fulfilling all aspects of 
the Aynak contract, which include community development projects, a 
power plant, and a 150 km railroad from the Uzbek border via the 
mine to the Torkham border crossing point at the Khyber Pass.  Li 
said that China welcomes the GIRoA's deployment of 1,200 Afghan 
National Police (ANP) guards to secure the project area, but that 
China is concerned about future security since MCC plans to bring 
5,000 Chinese engineers and workers to Aynak.  Li thanked the U.S. 
for sending 1,300 troops to Logar province.  Li also noted that MCC 
has suffered delays and even losses in shipping equipment through 
the Khyber Pass.  He also said that MCC plans to work closely with 
the Czech PRT, which has been very cooperative, to determine 
community development needs. 
 
************************************ 
Kajaki Hydro Power Plant: Security 
 
KABUL 00000782  002 OF 003 
 
 
Concerns Stalled Chinese Involvement 
************************************ 
 
¶4. (SBU) In November 2008, Chinese subcontractor to the Louis Berger 
Group (LBG), China Machine-Building International Corporation 
(CMIC), left Afghanistan after receiving kidnapping threats.  CMIC 
is to repair an existing turbine/generator and install a new one at 
Kajaki.  Although LBG disputes the credibility of the threats, 
Chinese officials were insistent in meetings with Emboffs that the 
threats were credible.  On February 10, Chinese DCM Li was evasive, 
describing Kajaki as a commercial dispute in which the Chinese 
government cannot intervene.  To date, CMIC engineers have not 
returned to Afghanistan, and CMIC has not given LBG an estimated 
return date. 
 
**************************************** 
Allegations of Destruction, Poor 
Chinese Workmanship in Roads and Telecom 
**************************************** 
 
¶5. (SBU) International partners, USAID, and Afghan business leaders 
criticize Chinese contractors for poor workmanship or slow progress, 
and in the case of the installation of the fiber optic cable (FOC), 
for destruction of existing road infrastructure.  In a March 17 
meeting with Econoff, Afghanistan Chamber of Commerce and Industry 
(ACCI) transport and freighting business leaders said that 
Chinese-constructed roads are among the lowest quality of all roads 
constructed in Afghanistan since reconstruction began in 2001 
(septel).  USAID estimates that since 2007, Chinese contractor ZTE 
has damaged 250 km of USAID-funded portions of the Ring Road (RR) 
while installing the fiber optic cable (FOC) for the Afghan 
government in southern Afghanistan.  USAID estimates it will cost 
USD 2.4 million to repair the damage.  In meetings with Emboffs, 
Chinese officials have denied knowledge of this damage, noting that 
ZTE uses an Afghan subcontractor because of security problems and 
that if there are damages, it is the fault of the Afghan 
subcontractor. 
 
¶6. (SBU) Some international partners complain quietly that the 
Chinese use security concerns as a pretext to account for slow 
progress in some infrastructure projects and to shift blame to 
Afghan subcontractors.  Asian Development Bank (ADB) officials told 
Econoff on February 28 that, independent of the security problems in 
Badghis, the ADB is dissatisfied with their Chinese contractor's 
management of the project.  ADB officials noted that only 20 percent 
of the road has been constructed, though the project was supposed to 
end in December 2008.  ADB also complained that China Railways 
bribes local officials for assurances of security (unsuccessfully) 
and makes no effort to incorporate community development into the 
project. 
 
¶7. (SBU) In a March 23 meeting with Econoff, Deputy Minister of 
Interior Mangal noted that Badghis province is a high-risk region 
for the Afghan National Police (ANP).  Mangal reinforced the idea 
that China Railways should do more to provide community development 
in order to gain the local community's support for road projects. 
Mangal noted that community development has been successful in other 
places where insurgents have tried to disrupt infrastructure 
projects by intimidating local villagers.  However, Chinese Economic 
Counselor Hu told Econoff that ultimately the GIRoA must do more to 
ensure security in Badghis. 
 
¶8. (SBU) Afghan government officials appear optimistic about Chinese 
commitments and are careful not to strongly criticize Chinese 
companies for poor workmanship.  In a March 17 meeting with Econoff, 
Deputy Minister of Public Works Rasooli noted that security problems 
have crippled Chinese work in Badghis and at Kajaki.  He 
acknowledged that China Railways progressed too slowly in the 
Badghis RR project, partly because the Ministry of Interior has not 
done enough to provide security.  In a February 25 meeting, Afghan 
Telecom's FOC project manager Sanjeeva Saxena argued that the USAID 
contractor and subcontractors have inflated damage estimates to the 
RR and noted that the FOC contractor has only worked along about 240 
km of RR in the south and not all of this is damaged. 
 
¶9. (SBU) COMMENT: China's record in Afghan reconstruction is mixed, 
with security and logistical concerns, not unknown among other 
 
KABUL 00000782  003 OF 003 
 
 
foreigners here, underlining performance problems.  Chinese 
officials emphasize that China has generously donated to 
humanitarian causes in Afghanistan and that the Chinese government 
does not promote any one sector over another.  However, most Chinese 
resources and commitments focus on natural resource extraction 
related to Chinese domestic industrial development and 
infrastructure projects related to that extraction or that primarily 
benefit Chinese commercial interests in Afghanistan.  Chinese road 
and rail projects are situated near major supply routes and Chinese 
investments, and will ultimately facilitate the import of 
construction materials from China and exports of natural resources 
to China.  At Aynak, it remains to be seen how much of the 
investment MCC will actually deliver (township development, power 
station, railway) and how vigorously they will pursue environmental 
protection (a condition of the project).  The large number of 
Chinese laborers to be brought in suggests less Afghan job creation 
than would ideally be the case.  Afghanistan, China and others in 
the international community have a shared interest in improving 
security conditions to enable Chinese reconstruction-related 
investment to proceed and ensuring that such investment achieves a 
balance between investor- and host-country interests.  We remain 
optimistic that the Chinese will continue to support reconstruction 
as security, hopefully, improves, but we are wary that timelines for 
Kajaki and Aynak will be stretched if security remains a pressing 
concern.  End Comment. 
 
WOOD