VZCZCXRO2381
RR RUEHDBU RUEHIK RUEHPOD RUEHPW RUEHSL RUEHYG
DE RUEHBUL #2763/01 2531205
ZNR UUUUU ZZH
R 101205Z SEP 09
FM AMEMBASSY KABUL
TO RUEHEG/AMEMBASSY CAIRO 0291
RUEHC/SECSTATE WASHDC 1406
RUEKJCS/SECDEF WASHINGTON DC
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0884
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 KABUL 002763 
 
SIPDIS 
 
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E.O. 12958; N/A 
TAGS: BEXP ECON EINV EMIN PREL AF
SUBJECT: DOD Business Transformation Delegation Visits Afghanistan 
 
SUMMARY 
------- 
 
¶1.  (U) The Department of Defense (DoD) Task Force on Business 
Development and Stability Operations -- led by Deputy Undersecretary 
of Defense Paul Brinkley -- visited Afghanistan July 26-30, 2009, 
chiefly to identify economic opportunities/ventures that could boost 
local employment significantly with minimal monetary, technical, 
and/or marketing assistance.  These ventures -- which delegation 
members often described as "low hanging fruit" or "shovel ready" -- 
would be pursued at the RC or PRT level.  Following visits to 
Lashkar-Gah, Herat, Mazar-e Sharif, Parwan, Panjshir, and Kabul, the 
delegation stated Afghanistan's business community is more 
profit-motivated and receptive to assistance than the team had found 
in Iraq, where the DOD Task Force began operation in 2006.  The 
Business Transformation Task Force -- composed of Office of the 
Secretary of Defense (OSD) advisors and private sector consultants 
-- plans to return in October to negotiate and finalize its presence 
in Afghanistan.  End summary. 
 
BUSINESS ROUNDTABLE SETS STAGE 
------------------------------ 
 
¶2. (U) Deputy Ambassador Ricciardone and Coordinating Director for 
Development and Economic Affairs Wayne co-chaired a business 
roundtable on the first day of the delegation's visit. 
Approximately twenty Afghan and American attendees described various 
familiar obstacles to private investment: threats to their personal 
security; corruption; weak and/or expensive access to capital, 
especially for smaller firms; high transport costs; shortage of 
skilled labor; policy shortcomings; general inattention in the GIRoA 
to business needs; and an overall lack of appreciation on the part 
of the government for the private sector's role as a primary engine 
for Afghan economic growth.  Participants noted that Afghanistan 
currently ranks dead last out of 181 countries measured in terms of 
"Protecting Investors."  The group's outlook was not entirely 
negative, however.  All agreed Afghanistan has great potential to 
attract private investment if it can improve the policy environment 
and reduce corruption.  They cited agriculture and mining as key 
potential growth sectors.  The executives noted that Afghanistan 
scores well on a few of the World Bank indicators, including its 
25/181 rank on registering businesses, demonstrating the 
government's ability to do better when it targets specific problems. 
 
 
¶3. (U) Participants also stressed the importance of Coalition forces 
and foreign aid agencies boosting the amount of procurement they do 
from local Afghan sources.  (Note: "Afghan First" is a concept the 
Mission is promoting and advancing vigorously.  End note.)  (The use 
of common contracting standards is also key, requiring three-way 
cooperation among business, the Afghan government, and the 
international community to fight corruption.  Finance sector 
executives noted while 18 private Afghan commercial banks have been 
established and mobilized domestic deposits, their high interest 
rates (15-20%) limit small and medium enterprises' access to 
financing.  They added that while some micro-financing ventures 
exist (including projects financed by USAID), they need to be 
expanded to non-secure areas of Afghanistan and increase the 
proportion of women participating.  Commerce Minister Shahrani 
acknowledged the challenges facing Afghanistan's private sector and 
reaffirmed his own commitment to expanding business-friendly 
regulation.  He insisted the Afghan government is taking concrete 
steps to improve the environment for business and is taking business 
views into account in making policy. 
 
¶4. (U) The Afghan and U.S. business attendees represented numerous 
sectors, including mining, food and beverages, insurance, finance, 
energy, construction, and trading.  The roundtable also received a 
presentation from leaders of the American Chamber of Commerce in 
Egypt, who shared their experience in building from scratch what is 
now one of the largest and most effective AmChams in the Muslim 
World.  Roundtable participants agreed an AmCham could strengthen 
the voice of the private sector in Afghanistan.  The Mission will 
pursue conversations with the Afghan business community to determine 
whether there is sufficient demand to launch and sustain a chamber 
(which complements existing Afghan/U.S. efforts) in Afghanistan. 
 
KABUL 00002763  002 OF 003 
 
 
 
LASHKAR-GAH EXHIBITS PROMISE/HERAT FLEXES INDUSTRIAL MUSCLE 
----------------------------------- 
 
¶5. (U) Task Force Brinkley noted their earlier notions of 
Afghanistan's lack of entrepreneurial spirit and dearth of economic 
energy were rapidly dispelled when the delegation toured several 
facilities in and around Lashkar-Gah in Helmand Province, known for 
its Taliban presence and copious poppy production.  Among the 
highlights of the tour were a poultry farm, a marble/decorative 
stone processing facility, and an experimental farm.  Delegation 
members said they were surprised at the permissive security 
situation in the city and encouraged to hear the Bost Airfield had 
been opened and that an agricultural processing facility adjacent to 
it would be opened in the near future.  A discussion with tribal 
elders and representatives of line ministries highlighted the need 
to align more closely agri-business/food processors with farmers in 
order to increase production, quality, and efficiency.  Furthermore, 
the task force's agricultural specialist remarked the lack of feed 
mills in Helmand -- and in Afghanistan in general -- is a glaring 
weakness and potential opportunity.  Investment in such facilities 
will plug a vital hole in the agricultural supply chain and improve 
animal husbandry stocks and poultry/egg operations while reducing 
reliance on imported feed. 
 
¶6. (U) Task force members reported they were "shocked" to learn the 
level of industrial and business activity in Herat.  In rapid 
succession, the task force visited factories/operations involved in 
the production/processing of marble, plastic wares, sodas, paint, 
tomato paste, cookies, ice cream, cotton, and steel.  All the 
facilities were within three to five kilometers from the airport in 
Herat and most were located in the same industrial park.  Most of 
the owners indicated the need for assistance in securing capital and 
additional markets, which would allow them to expand operations and 
improve production and efficiency.  During an afternoon luncheon 
presided over by the provincial governor, ACCI leadership and 
numerous local businessmen solidified the impression that Herat's 
business community is more than ready to expand operations, seek 
additional markets, and partner with foreign direct investors. 
 
MAZAR-E SHARIF, GATEWAY TO NORTHERN NEIGHBORS 
--------------------------------------------- 
 
¶7. (U) THE Mazar-e Sharif visit began with a visit, guided by  the 
Director General of Customs to the Hairatan border crossing (about 
40 miles north of Mazar-e Sharif).  The border crossing is the 
country's main entry point for fuel.  A rail spur is just inside the 
border and connects to a container-loading facility.  The Asian 
Development Bank (ADB) is developing plans to extend the rail line 
to Mazar-e Sharif and the Korean company Hanjin is considering 
investing to upgrade the current loading facility/bay.  The tour and 
discussion made it abundantly clear the Hairatan border crossing is 
underutilized for exports, as most vehicles are coming into the 
country and leaving empty. 
 
¶8. (U) The visit to Mazar-e Sharif also focused on the carpet 
industry, including a visit to a wool spinning operation and the 
local carpet guild.  In the discussions that ensued after the tours, 
there was an emphasis on building a vertically integrated value 
added supply chain that includes all pre- and post-weaving 
activities (dye selection/collection, wool spinning, cutting and 
washing).  Deputy U/S Brinkley recounted the work they had done in 
Iraq to rebuild the carpet industry where the Task Force focused on 
improving "Iraq centric" designs, vertical integration, enhanced 
quality through better materials, and matching production to high 
end markets in the UK and U.S.  The Mazar-e Sharif wool spinning 
factory owner and carpet guild members believed a similar approach 
would greatly assist their industry.  However, they emphasized the 
need to quantify accurately changing customer tastes for carpet 
designs and colors as most imperative.  The Task Force mentioned the 
possibility of bringing experts to Afghanistan to discuss 
implementation of such a plan. 
 
PARWAN'S STATE-OWNED CEMENT FACTORY 
----------------------------------- 
 
 
KABUL 00002763  003 OF 003 
 
 
¶9. (U) Drawing the Task Force's experience in revitalizing nearly 
twenty formerly state owned cement factories in Iraq, the Force 
visited the Jebel Saraj Cement Factory in Parwan province.  The 
plant formerly produced most of the cement utilized in Afghanistan. 
As the Task Force toured the facility and discussed its operations 
with the General Manager (who has worked there for thirty years), 
delegation members commented most if not all of the cement factories 
revitalized in Iraq were in worse physical and financial shape when 
embraced by the Task Force.  State-owned enterprises in Iraq had 
been propped up by petroleum revenues and employed excessive 
numbers, while the Jebel Saraj factory breaks even, despite the lack 
of access to electricity and only intermittent periods of operation. 
 The Ministry of Mines sought to tender the lease for the factory's 
operation a couple of years back, but negotiations broke down with 
an interested Indian investor.  In July, they once again released a 
tender notice for Jebel Saraj.  Task Force Gladius is currently 
supporting the area and the factory by installing diesel generators 
that would provide a more constant flow of power. 
 
PANJSHIR VALLEY: NATURAL RESOURCES 
---------------------------------- 
 
¶10. (U) Known for its panoramic vistas and lush vegetation, Panjshir 
province is one of the better governed and more hospitable places to 
live and work in Afghanistan.  The Task Force met with PRT 
leadership, the governor, and toured a marble processing operation, 
Afghanistan's first wind farm, and a micro-hydro facility.  Panjshir 
province has abundant deposits of marble and of precious and 
semi-precious gemstones.  Current USAID development projects focus 
on creating value-added supply chain processes (e.g., 
cutting/polishing) that would create employment and constituencies 
that could begin to dislodge those profiting from the illegal gem 
and marble trade into Pakistan.  The Task Force and PRT team 
discussed ways to provide complementary support for these efforts as 
well as to build up tourist-friendly infrastructure that would 
encourage and buttress nascent eco-tourism in the province. 
 
OVERALL THEMES/OBSERVATIONS AND WAY FORWARD 
------------------------------------------- 
 
¶11. (U) From the onset of their visit, the DOD Business Development 
Task Force members described Afghanistan's business community as 
more profit-oriented than in Iraq.  They also stated that they found 
an enthusiasm and cooperativeness that simply did not exist in Iraq. 
 The delegation said they saw a surprising range of existing 
opportunities in a variety of industries, particularly in Herat, but 
also in Mazar-e Sharif, Parwan, and Panjshir.  Nevertheless, they 
noted business progress is likely to be measured by modest gains, 
emphasizing that mining remains the biggest "game changer".  Efforts 
at quantifying small and medium deposits of commercially viable 
minerals must be intensified.  The Task Force members noted the 
Ministry of Mines needs to be brought on board with this effort. 
Furthermore, "Afghan First" efforts can carefully be pushed harder. 
One member observed that USG procurement, especially for the 
military, could focus on developing a supply chain for raw materials 
(especially in regard to fruit/vegetables, cement, and other 
essential supplies).  In addition, the creation of an "Afghan Brand" 
for carpets and semi-precious stones could capitalize on worldwide 
recognition and sympathy for international efforts here.  Embassy 
understands a subsequent follow up visit is now planned for 
mid-October and looks forward to supporting it. 
 
¶12. (U) This cable was cleared by Under Secretary Brinkley. 
 
EIKENBERRY