VZCZCXRO5036
PP RUEHDBU RUEHIK RUEHPOD RUEHPW RUEHSL RUEHYG
DE RUEHBUL #1734/01 1831307
ZNR UUUUU ZZH
P 021307Z JUL 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 9921
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0827
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 KABUL 001734 
 
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 JCASAL, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
SENSITIVE 
 
SIPDIS 
 
E.O.  12958 N/A 
TAGS: ECON EAID EFIN AF
SUBJECT: Afghans Seek 55 Priority Advisors and Claim Revenue 
Success 
 
SUMMARY 
 
¶1. (SBU) The JCMB Standing Committee on Development broadly endorsed 
the Afghan government's revised Civilian Technical Assistance Plan 
asking for 55 urgently needed advisor positions.  Subsequently, the 
Finance Minister signaled he hopes donors will provide funding for 
the Afghan government to directly hire the advisors.  The GIRoA also 
announced an almost 100 percent increase in recent revenue 
collection and specific steps to achieve further improvement. 
Separately, the IMF resrep described the revenue performance as 
positive but fragile and urged the U.S. and other donors to press 
for structural reforms to secure lasting improvement in GIRoA fiscal 
performance.  The request for the advisors and other issues will be 
considered at a JCMB plenary on July 8.  End Summary 
 
¶2. (SBU) The JCMB Standing Committee on Economic and Social 
Development convened June 23 to prepare for the JCMB plenary to be 
held on July 8.  The meeting was co-chaired by UN SRSG Kai Eide and 
Afghan Finance Minister Omar Zakhilwal.  The U.S. was represented by 
Ambassador Wayne, newly arrived Coordinating Director for 
Development and Economic Affairs.  Eide opened the meeting by 
announcing that Zakhilwal would also become Afghan co-chair of the 
JCMB, replacing Senior Minister Hedayat Arsala.  Eide said the July 
8 meeting would be the last JCMB before the August 20 elections and 
that it was important for Afghans and the international community to 
make progress on development now and sustain the momentum through 
the inevitably distracting election period.  Zakhilwal praised the 
"new spirit of coordination among donors" and also hoped the 
election period would not interrupt this improved cooperation. 
 
CIVILIAN TECHNICAL ASSISTANCE PLAN 
 
¶3. (SBU) Zakhilwal summarized the GIRoA's revised request for 
civilian technical assistance (TA), which was circulated to donors 
on June 22 (and emailed to SCA/A).  The revised plan retains the 
principles for TA articulated in the GIRoA's original TA plan from 
April, but prioritizes some 55 advisor positions urgently needed and 
elaborates on delivery mechanisms.  Zakhilwal said the GIRoA wants 
to implement this strategy in two phases: 1) immediately deploy 
urgently needed TA to priority areas of government through existing 
delivery mechanisms; and 2) develop a sustainable, Afghan-led 
program - the National Capacity Development and Technical Assistance 
Program (NCDTAP) - to manage TA in the future.  The GIRoA seeks a 
pooled, basket-funding mechanism to finance the NCDTAP. 
 
¶4. (SBU) Zakhilwal further proposed creation of new Task Force on 
Civilian TA, which he said should meet immediately after the 
requested approval of the whole scheme at the July 8 JCMB.  The task 
force would work to place the 55 urgently needed TA's, monitor their 
work, and steer creation of the NCDTAP.  He urged donors to apply 
the principles of the TA plan in selecting the 55 TA's, which he 
hoped could be deployed within a few months, and especially stressed 
the need for Afghan ownership and for advisors with knowledge of 
Afghan languages and culture.  Regarding the new plan's relation to 
the original April plan, Zakhilwal said, "The old document is now 
history." 
 
¶5. (SBU) Donors generally supported the revised TA plan.  Ambassador 
Wayne said the U.S. plans a significant increase in civilian TA and 
welcomed the GIRoA effort to improve coordination and prioritize its 
requests.  He said the U.S. wants to align our assistance with 
Afghan needs and would seek to attract qualified advisors from the 
region.  He also said UNAMA should play a role in coordinating TA. 
The U.S. would review the requests for urgently needed TA and see 
where we could contribute. 
 
¶6. (SBU) The World Bank rep supported the first phase of the 
proposed plan but expressed concerns about the NCDTAP.  She said the 
Bank does not believe there can be a single National Program that 
can effectively deliver TA for capacity development in public 
institutions.  The latter is a broader concept involving a mix of 
interventions beyond TA.  She also said a pooled approach to TA 
delivery had been tried before in Afghanistan - the World 
Bank-managed Technical Assistance and Feasibility Studies program - 
and found to be ineffective.  It was left that the GIRoA would 
 
KABUL 00001734  002.2 OF 003 
 
 
circulate a new document reflecting donor comments prior to JCMB 
consideration of the TA plan. 
 
¶7. (SBU) On June 30, the Finance Minister told USAID Mission 
Director Frej that he would prefer if the U.S. and other donors 
provided funding directly to the Finance Ministry for the GIRoA to 
hire the advisors.  He argued that donors could establish 
appropriate mechanisms to monitor use of funds.  (Post is 
considering this proposal.) 
 
REVENUE ACTION PLAN 
 
¶8. (SBU) In the June 23 Standing Committee meeting, Zakhilwal said 
measures taken since he became finance minister in February have 
already significantly boosted revenue collection.  In the first 
quarter of Afghan FY 2009-10 (3/20-6/20) the government collected 
Afs 16.1 billion ($322 million) in all forms of revenue, up from Afs 
8 billion ($160 million) in the same period of the previous year. 
He said GIRoA collected an average of Afs 2.8 billion ($56 million) 
per month in customs revenue in this period, up from Afs 1.6 billion 
($32 million) last year.  Zakhilwal said the government can deliver 
even stronger results moving forward.  He described his new Revenue 
Action Plan, which includes numerous specific measures further to 
increase revenue as well as specific requests for donor assistance, 
some of which, the plan notes, the U.S. is already fulfilling. 
Zakhilwal admitted that the technical advisors needed to support the 
plan are in addition to the 55 urgently needed TA's identified in 
the Civilian TA Plan. 
 
¶9. (SBU) Donors strongly welcomed the good news on revenues and 
expressed support for the new plan.  They said recent progress 
confirmed their long-held view that the GIRoA could improve revenue 
collection and they looked forward to continued improvement.  The 
World Bank rep and USAID Mission Director both noted that some 
elements of the Revenue Action Plan should become benchmarks under 
the ARTF Incentive Program, thus offering a concrete donor reward 
for good performance.  The Standing Committee agreed to recommend 
the Revenue Action Plan to the JCMB plenary for approval. 
 
IMF'S CAUTION ON FISCAL PERFORMANCE 
 
¶10. (SBU) In a separate meeting with Ambassador Wayne and Mission 
staff June 29, IMF resrep (protect) noted the improved revenue 
collection and said it was fine for donors to welcome it.  But he 
cautioned that the improvement was fragile, depended on the activism 
of a few (replaceable) leaders, and has been achieved mainly by 
reducing tax leakage resulting from corruption, not durable, 
structural reform of the tax system.  At 7 percent, Afghanistan's 
revenue-to-GDP ratio remains the lowest in the world.  He further 
worried about increased spending pressure in the run-up to the 
August elections, and that the international community would lose 
important leverage to promote fiscal reforms after completion of 
HIPC debt reduction, tentatively scheduled for November.  The IMF 
resrep urged the U.S. and other donors to support structural reforms 
to help lock in and strengthen the revenue performance achieved to 
date. 
 
¶11. (SBU) Ambassador Wayne agreed and said the U.S. would work with 
other donors to deliver this message to the GIRoA.  He said the 
Mission might also issue a public statement following an expected 
Zakhilwal press conference where he would announce the improvement 
in revenue collection.  Zakhilwal told Ambassador Wayne at another 
function on June 29 that donor pressure to continue reforms and to 
meet IMF program requirements was important to moving ahead with his 
own efforts. 
 
PRIVATE SECTOR DEVELOPMENT 
 
¶12. (SBU) Commerce Minister Shahrani briefly reported to the 
Standing Committee on progress in the five priority areas for 
private sector development endorsed by the April JCMB: trade and 
transit facilitation, licensing reform, support for value-added 
processing, investment promotion, and capacity development.  He went 
into detail on donor-supported plans to reform business licensing. 
Noting current, multiple mandates (20 authorities responsible for 50 
 
KABUL 00001734  003 OF 003 
 
 
licenses), Shahrani said the GIRoA wants to make it easier to start, 
register, and formalize businesses.  The GIRoA will start with 
reforms in the Ministry of Commerce and Industries, then move to 
other ministers, and ultimately aim for an integrated, automated, 
GIRoA-wide one stop shop for business licensing.  The The U.S. and 
other donors expressed support for Shahrani's plans.  Co-chair 
Zakhilwal welcomed the Standing Committee's endorsement but added 
that cabinet approval would first be needed before the GIRoA would 
ask the JCMB to approve the one-stop shop idea.  (Comment: This 
latter proviso implies that some ministries might resist 
relinquishing their licensing prerogatives.) 
 
ANDS MANAGEMENT INFORMATION SYSTEM 
 
¶13. (SBU) The Ministry of Economy briefed on plans to develop 
information management processes related to its responsibility for 
monitoring and evaluation of projects implemented under the ANDS. 
The UK (DFID) and UNDP will provide TA to develop such processes. 
The program will start on a pilot basis. 
 
EIKENBERRY