VZCZCXRO4472
OO RUEHDBU RUEHPW
DE RUEHBUL #0790/01 0900330
ZNR UUUUU ZZH
O 310330Z MAR 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8025
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC PRIORITY 0134
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0768
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHNO/USMISSION USNATO BRUSSELS BE
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 000790 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, EEB/TRA/OTP AND SCA/A 
DEPT PASS AID/ANE 
DOT PASS FAA FOR RAY SMITH 
TREASURY PASS MHIRSON 
NSC FOR JWOOD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958 N/A 
TAGS: EAIR EFIN PREL EAID PGOV AF
SUBJECT: AMBASSADOR'S CALL ON NEW MINISTER OF TRANSPORT 
 
REF: A) 08 KABUL 2977; B) 09 KABUL 267; C) 08 KABUL 3011; D) 09 
KABUL 398 
 
¶1. (SBU) SUMMARY:  On March 23, recently confirmed Minister of 
Transport and Civil Aviation Hamidullah Farooqi told the Ambassador 
that the Afghan government is poised to sign a deal with the UAE to 
provide airport security at Kabul and Kandahar airports and open the 
Japanese-funded new international terminal at Kabul airport. 
Minister Farooqi appeared sympathetic to Kam Air's claim that the 
Business Receipt Tax is unfair to Afghan airlines, but acknowledged 
that the airlines must pay their taxes.  The Ambassador welcomed 
Minister Farooqi's efforts to establish a Civil Aviation Working 
Group and to shepherd the Civil Aviation Law through Parliament. 
The Ambassador assured Minister Farooqi of continued U.S. 
cooperation and support of the Afghan civil aviation sector.  End 
Summary. 
 
¶2. (SBU) In a cordial meeting with newly confirmed Minister of 
Transport and Civil Aviation Hamidullah Farooqi, the Ambassador 
congratulated Farooqi on his appointment and his strong confirmation 
by Parliament.  He told Farooqi that the U.S. is delighted to have a 
close and cooperative relationship with the Ministry of Transport 
and Civil Aviation (MoTCA) and assured Farooqi of continued U.S. 
support and engagement as MoTCA works to develop the capacity to 
manage Afghan civil aviation operations.  Farooqi warmly recounted 
his experiences as a student in Queens, New York and thanked the 
U.S. government for its strong support of Afghanistan's development 
and specifically for the USG's long history of collaboration with 
MoTCA.  Farooqi said he was pleased to undertake such an important 
task, but acknowledged the difficulties that MoTCA has endured in 
its leadership.  Farooqi noted that the Hajj will be among his 
biggest challenges as Transport Minister.  He said that he is 
hopeful that he can learn from the past experiences and improve the 
government's handling of the Hajj (reftel A). 
 
¶3. (SBU) Farooqi told the Ambassador that regional airport 
development is among his priorities.  Farooqi said many of 
Afghanistan's airports were built in the 1960s and now require 
updating and rehabilitation to make them functional.  The Ambassador 
noted the unfortunate circumstances that put the Jalalabad airport 
under military control, thereby inhibiting growth in civil aviation 
in eastern Afghanistan.  Farooqi said MoTCA is hoping to exploit 
projects in Nangarhar and thanked the U.S. for promising to help in 
the construction of a new civilian airport in Jalalabad.  Farooqi 
said that MoTCA looks forward to solving this and the Kabul airport 
problem.  Farooqi noted that Kabul needs a new airport that is 
bigger and closer in quality to airports in neighboring countries. 
Farooqi solicited USG support for a feasibility study for a new 
Kabul airport. 
 
¶4. (SBU) The Ambassador inquired about the status of the recently 
completed, Japanese-funded international terminal at Kabul 
International Airport.  The terminal was officially completed in 
November 2008 but sits empty because of security and maintenance 
concerns.  Farooqi said the new international terminal will be open 
in 1-2 months, as soon as he is able to secure a security contract 
with the Government of the United Arab Emirates (UAE).  Farooqi said 
the Afghan government and UAE are ready to sign an agreement on 
airport security (reftel B).  Farooqi said he plans to travel to Abu 
Dhabi soon to sign the agreement.  Farooqi told the Ambassador that 
the UAE has agreed in principle to expand security contract services 
to include all flights departing from Kabul and Kandahar, not just 
those going to Dubai.  Farooqi noted that MoTCA is also negotiating 
an airport maintenance contract.  He said that once the maintenance 
contract is settled, MoTCA can open Kabul's new international 
terminal. 
 
¶5. (SBU) The Ambassador urged Minister Farooqi to encourage tax 
compliance by air carriers, and expressed concern that Kam Air's 
campaign to eliminate the Business Receipts Tax (BRT) hurts the 
GIRoA's efforts to increase budget revenue (reftel C).  The BRT, 
Afghanistan's equivalent of a value-added tax, is charged to 
airlines and other service industries at a rate of 20%.  Kam Air has 
consistently refused to pay the tax - even though it adds the cost 
of the tax to its tickets - and has been lobbying the President and 
Cabinet to remove the BRT from airlines.  The government's inability 
to collect taxes from Kam Air has become a flashpoint with the IMF, 
which has made the collection of taxes from all airlines a condition 
of its program with Afghanistan.  Kam Air argues that the BRT 
effectively raises the price of tickets issued by Afghan carriers 
and hurts Afghan carriers because in order to cover the tax, 
airlines charge passengers more for the same route as the 
 
KABUL 00000790  002 OF 002 
 
 
international carriers.  Therefore, because of the BRT, Afghan 
carriers are supposedly less competitive vis-a-vis the international 
carriers.  The IMF and others oppose this reading, as foreign 
airlines must of course pay different taxes levied by their own 
governments.  To date, Kam Air is the only airline that is 
delinquent on its taxes. 
 
¶6. (SBU) Farooqi said the GIRoA is trying to resolve this issue with 
the airlines, but indicated that he supports Kam Air's assertion 
that the BRT is a double standard because international carriers 
like Indian Airlines and Pakistan International Airways do not have 
to add this cost to their tickets.  Farooqi noted that revenue 
collection is a priority of the government and that Minister of 
Finance Zakhilwal has promised Parliament to increase tax 
collection.  Farooqi, a board member of the Afghanistan Chamber of 
Commerce and Industries (ACCI), said that the ACCI has discussed the 
BRT issue with President Karzai and he believes that Kam Air is 
willing to pay "fair" taxes.  The Ambassador countered that Kam Air 
seems to be a successful, profitable airline, and emphasized that 
Kam Air must pay its taxes. 
 
¶7. (SBU) The Ambassador said that the USG has invested a great deal 
in Afghan reconstruction and economic development.  He noted that 
President Karzai often complains that the U.S. does not funnel 
enough assistance directly through the Afghan budget.  The 
Ambassador said it is easier to channel more aid through the budget 
if the Afghan government is doing all it can to collect taxes and 
achieve fiscal independence.  The Ambassador questioned the 
legitimacy of Kam Air's claim that international carriers should 
also be obligated to pay the Afghan BRT when they pay taxes in their 
own countries.  For instance, if India decides to subsidize its 
airlines, the GIRoA should not use that policy as justification for 
not collecting taxes from Afghan airlines. 
 
¶8. (SBU) Farooqi told the Ambassador that MoTCA is working on the 
draft Civil Aviation Law and he expects to have it passed by 
Parliament within the next couple of months.  Noting the lengthy 
process it may take to secure Parliamentary approval of the law, 
Farooqi posited that perhaps a Presidential decree would be better. 
Ambassador encouraged the Minister to work with Parliament and 
develop a relationship of trust and confidence with the legislative 
body.  He noted Finance Minister Zakhilwal's recent success in 
obtaining Parliamentary approval on the new budget.  Farooqi noted 
that Parliament approved his nomination by a very high number and he 
believes he can continue to have a positive working relationship 
with Parliament. 
 
¶9. (SBU) The Ambassador told Minister Farooqi that the U.S. is ready 
to support MoTCA in the establishment of a Civil Aviation Working 
Group (CAWG) (reftel D).  Farooqi agreed that the CAWG is the best 
way to bring together civilian and military international actors 
with the MoTCA in support of Afghan civil aviation priorities.  The 
Ambassador noted that involving the donors, particularly European 
countries, will provide opportunities to more effectively solicit 
donor funding for civil aviation projects.  Farooqi promised to 
finish a charter for the CAWG and call the first meeting in the 
coming month. 
 
¶10. (SBU) COMMENT:  The Ambassador's meeting was cordial and 
friendly.  Minister Farooqi appeared poised to take on the challenge 
of managing a tough portfolio of issues, including the Hajj, which 
has led to the downfall of several of Farooqi's predecessors.  While 
Post applauds his movement towards establishing the CAWG and in 
signing the airport security agreement with UAE, the Minister's 
other priorities for MoTCA's capacity development were unclear. 
Post was disappointed, though not entirely surprised, by Farooqi's 
sympathy for Kamgar's anti-BRT campaign, given the Minister's 
private sector background.  However, we hope that if Farooqi 
succeeds as the tenth Minister of Transport, he will understand the 
utmost importance that donors and the IMF place on revenue 
collection and tax compliance by wealthy airline moguls.  End 
Comment. 
 
WOOD