VZCZCXRO2641
PP RUEHIK
DE RUEHBUL #3305/01 2901103
ZNR UUUUU ZZH
P 171103Z OCT 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 2210
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0910
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 04 KABUL 003305 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS AID/ASIA SCAA 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
CENTCOM FOR CSTC-A, USFOR-A 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
E.O.12958: N/A 
TAGS: PREL PGOV EINV ECON ETRD EAID BEXP AF
SUBJECT: A window into Afghanistan's North 
 
KABUL 00003305  001.2 OF 004 
 
 
¶1. (U) SUMMARY: A visit to Mazar-i-Sharif revealed a relatively 
vibrant economic environment, concerns about growing insecurity 
especially in nearby Kunduz, and several very effective AID programs 
helping business students and Islamic credit unions. 
 
¶2. (U) Coordinating Director for Development and Economic Assistance 
Wayne and USAID Director Frej accompanied Afghan Minister of 
Commerce and Industries (MOCI) Shahrani to Mazar-i-Sharif on October 
1, where together they canvassed a wide range of development 
programs designed to bring economic stability to Afghanistan's 
northern region.  Regional Command-North (RC-N) Commander Brigadier 
General Joerg Vollmer provided an overview of regional security, 
noting a lack of both security forces, particularly police, and 
training for Afghan counterparts in his command.  He listed NATO's 
partners' investments in various sectors, including airports, roads, 
and hydropower.  Balkh Province Governor Atta Mohammed Noor asked 
for signature infrastructure projects for Balkh province, and 
affirmed the value of a potential duty-free zone to the region's 
entrepreneurs.  The delegation launched Afghanistan's second 
provincial central business registry office (the primary purpose for 
the visit), met with the Balkh University Chancellor, held a 
luncheon roundtable with USG-sponsored business interns and business 
leaders, and met members of USAID-funded Islamic Investment Finance 
Cooperatives (IIFCs).  END SUMMARY. 
 
RC-NORTH COMMANDER POINTS TO ANSF SHORTAGE AND INADEQUATE POLICE 
SALARIES AS A CONSTRAINT ON CONFIDENCE BUILDING 
 
¶3.  (SBU) Brigadier General (BG) Vollmer highlighted insurgency and 
security issues in his nine-province area of responsibility (AOR), 
home to approximately 10 million Afghans.  The population remains 
primarily rural, distributed among approximately 9,000 villages and 
five major cities.  The RC currently fields 5,700 ISAF troops, 7,000 
Afghanistan National Army (ANA) soldiers, and 12,000 Afghanistan 
National Police (ANP).  In Kunduz, for example, 1,000 police 
officers protect 170,000 residents.  It is thus no surprise that 
insurgent groups have increased activity.  BG Vollmer noted that the 
shortage of Afghanistan National Special Forces (ANSF) officers is a 
primary constraint to consolidating central government control and 
building confidence among the RC's diverse ethnic mix.  Vollmer 
reported that an agreement with local governors and the national 
government to increase police salaries and pay them regularly in 
local communities would be more effective than spending the same 
funds to arm local militias or sending the police to other parts of 
the country.  In his view, the latter two options undermine 
confidence in the central government.  (Governor Atta favors relying 
on the police, while the Governor of Kunduz favors arming local 
militias.) 
 
¶4. (SBU) Vollmer noted a broad variance in ISAF civilian- military 
coordination across RC-North's five Provincial Reconstruction Teams 
(PRTs).  Civ-mil operations are closely coordinated in the 
German-controlled PRTs of Kunduz and Faizabad.  Development advisors 
in Swedish/Finnish PRT Mazar-i-Sharif operate somewhat more 
independently of the military, while the Norwegian-run PRT in 
Meimana maintains strict separation between its civilian and 
military components.  Once the ANSF are in a position to take over, 
Vollmer concluded, then "we can go home", in reference to graduating 
the military side of PRTs. 
 
¶5. (SBU) Vollmer called Kunduz province his primary "area of 
concern," with Faryab province a close second based on numbers of 
insurgent incidents and general levels of insecurity.  He called for 
greater efforts to recruit and train ANA and ANP with expanded 
German and U.S. mentoring, as well as more ANP training at the Mazar 
and Kunduz Regional Training Centers.  He identified ANP training 
programs and linked Focused District Development mentoring as 
important steps in enhancing the professionalism and credibility of 
ANP district forces.  Vollmer credited strong ISAF, ANA, and ANP 
coordination for the opening of 97% of polling stations in the 
region on Election Day. 
 
ECONOMIC DEVELOPMENT AND SIGNATURE INFRASTRUCTURE PROJECTS: THE BEST 
WEAPON FOR SECURITY 
 
¶6. (SBU) Calling economic development the best weapon against 
expanding insurgency, Vollmer noted that donor and Multilateral 
Development Bank-funded projects across the RC include hospitals, 
airports, railway lines, agriculture, water, and energy 
 
KABUL 00003305  002.2 OF 004 
 
 
infrastructure.  In Balkh province alone, total development 
expenditures are approximately $700 million, including a major joint 
German/UAE reconstruction of the Mazar airport.  German expenditures 
in Kunduz province have totaled 334 million Euros (approximately 492 
million USD) with projects focused on bridges, roads, and 
hydroelectric projects.  In Badakhshan, German funding includes 6.0 
million Euros (8.8 million USD) to build a hospital and 3.8 million 
Euros (5.6 million USD) for airport reconstruction.  Vollmer 
highlighted completion of the RC-North segment of the national ring 
road and the start of a road from Balkh to Bamyan that will provide 
an alternate route to the sometimes-snowbound Salang tunnel.  He 
noted the importance of completing road construction across all five 
provinces.  Vollmer called expanding irrigation in the 
agriculturally dependent north a challenge due to poor water 
quality, although he noted that Kunduz province boasts the most 
extensive and best-maintained irrigation system in the region. 
 
¶7. (SBU) Vollmer noted relatively effective provincial governance 
structures and strong governors in Balkh, Faryab, and Badakshan. 
These governors, he said, have managed to make their provinces 
relatively poppy free, and look forward to signature infrastructure 
projects to reinforce licit agricultural activity.  (Note: Balkh is 
poppy-free due to strong intervention by the Governor.  However, the 
province is not hashish-free and remains one of the larger 
hash-producing provinces.) 
 
GOVERNOR ATTA PRIORITIZES INFRASTRUCTURE DEVELOPMENT AND 
PRIVATE-SECTOR LED GROWTH 
 
¶8. (SBU) In his meeting with the delegation, Governor Atta 
criticized international donor development spending in Balkh 
province.  He asked for fewer workshops and seminars and more "hard" 
infrastructure development projects, and listed the Cheshma-i-Shafa 
hydro project in south-western Balkh as a priority.  Extending 
irrigation canals from the Amu Darya river to the Balkh agricultural 
heartland, he asserted, will not only have a positive economic 
impact but also protect the environment. 
 
¶9. (SBU) Atta recognized the need for private sector-led economic 
development in Balkh and expressed appreciation for the 
USAID-supported, MOCI-led Afghan Central Business Registry (ACBR) 
initiative that the delegation would launch later in their visit. 
USAID Mission Director Frej thanked the governor for his feedback on 
assistance programs in Balkh Province and said that investment in 
northern Afghanistan is a priority.  For example, the USG is 
considering large signature infrastructure projects in the water 
sector.  Governor Atta thanked Frej for this commitment, and added 
he has an interest in addressing commercial investment activities. 
He requested assistance in creating a duty-free zone in the north 
and increasing visible projects like irrigation and power.  A 
duty-free zone, he said, would complement the new railroad link 
which the ADB will fund, from Hairaton to Mazar-i-Sharif and the 
expanded airport. 
 
REFORMS FACILITATE BUSINESS IN NORTHERN AFGHANISTAN 
 
¶10. (U) Commerce Minister Shahrani joined Ambassador Wayne, Mission 
Director Frej and Governor Atta to officially open the country's 
second provincial business registry.  (The first provincial business 
registration office opened in Jalalabad, Nangarhar Province, in July 
of this year.)  The central business registry in Mazar-i-Sharif will 
service entrepreneurs from Balkh, Jawzjan, Samangan, Sar-e-pol, and 
Faryab provinces. 
 
¶11. (U) The offices make it possible to complete all the steps 
required for business registration in a short time at one central 
location, ranging from obtaining a Ministry of Finance tax 
identification number to publishing a business name in the Ministry 
of Justice official gazette.  All services together cost one low fee 
of 500 Afs (or 10 USD), paid directly to the Central Bank.  A 
process that once took eleven steps and up to twenty days in Mazar 
will now take four steps, streamlining government services and 
reducing opportunities for corruption, and the whole process should 
be completed in two days or less.  As added benefit, registered 
entrepreneurs will increase their potential to qualify for bank 
loans, attract investment, and accelerate customs clearances, and 
the Afghan Government will improve its data collection and reporting 
and its official revenue base. Minister Shahrani hailed the event as 
an important milestone. 
 
KABUL 00003305  003.2 OF 004 
 
 
 
¶12. (U) The launch took place in a room crowded with private sector 
and government representatives, evidence of the business community's 
support for the reform.  Ambassador Wayne praised Afghanistan's 
improvement in the "Starting a Business" category of the World 
Bank's Doing Business report, but pointed out that Afghanistan still 
ranks poorly in business licensing and permits, which represents the 
next stage of regulatory stream-lining.  The new ACBR represents 
what is possible and should be extended to further stages of 
business operations in Afghanistan.  (Note: The Ministry intends to 
expand this regulatory reform to Herat, Kandahar, Khost and Kunduz 
in the next several months.  Entrepreneurs in all 34 of 
Afghanistan's provinces will eventually have access to this 
streamlined registration process.  End note.) 
 
FURTHER RESOURCING REQUIRED FOR UNIVERSITIES 
 
¶13. (SBU) Balkh University Chancellor Mohammad Naser Hyder asked the 
U.S. to support construction of one of seven faculties on the new 
campus.  USAID's Mission Director responded that USAID is committed 
to continuing its support to the university through its current 
teacher and faculty training programs.  USAID is also funding 
construction of the Faculty of Education on the university's current 
campus, including capacity building for planning, financial and 
management operations, and maintenance of the new facility. 
 
LINKAGES BETWEEN EDUCATION AND THE JOB MARKET 
 
¶14. (U) Ambassador Wayne led a roundtable discussion with Balkh 
University business interns, intern graduates, and faculty.  USAID's 
Afghanistan Small and Medium Enterprise Development (ASMED) project 
coordinates the internship program with the university.  Male and 
female students, speaking impressive English, unanimously praised 
the program, which selects 150 students out of 500 applicants for a 
three-month professional training program followed by three-month 
practical internships.  Students requested the program be expanded 
to allow for more student participation, longer internships, and 
other professions beyond business.  Minister Shahrani noted the 
Afghan Government's need to employ bright, energetic, and ambitious 
graduates (and even handed out his business cards).  He pledged to 
recruit 8 to 10 graduates from the University in the future.  USAID 
Mission Director Frej added USAID is also interested to recruit 
qualified Afghans in Kabul and at key regional platforms. 
 
ISLAMIC-COMPLIANT FINANCIAL SERVICES TO RURAL COMMUNITIES BOLSTER 
STABILITY AND INVESTMENT 
 
¶15. (SBU) The delegation also held a roundtable with members of the 
Islamic Investment Finance Cooperatives (IIFCs) (a credit union 
equivalent) from Balkh, Jawzjan, and Samangan Provinces.  Mehir 
Momand, Afghanistan Supervisor and Examination Manager of the 
USAID-funded World Council of Credit Unions (WOCCU)/Afghanistan, 
chaired the event.  Participants included female and male IIFC 
council members drawn from Afghanistan's traditional rural 
population.  The discussion centered on the councils' provision of 
Sharia-compliant finance mechanisms.  The councils also use repaid 
loans to provide Sharia-compliant "zakat" (charitable works) into 
community-determined projects such as mosque refurbishment and 
literacy training.  Members requested that Minister Shahrani promote 
further efforts to develop Sharia-compliant credit instruments. 
Speakers noted that social pressure and personal communications are 
the best mechanisms to ensure that members repay loans. 
 
¶16. (U) To date, IIFCs in Afghanistan have disbursed 29,926 loans 
totaling over $18.6 million, with over 10,000 active borrowers and 
more than 39,000 network members.  More than 95 percent of IIFC 
loans in the north are repaid on time.  Loans range between $500 and 
$1,000 with terms between 6-9 months.  USAID will soon increase 
WOCCU's program in the south and east to extend financial services 
to remote and marginalized communities.  The IIFC members at the 
roundtable expressed hope that they would be authorized to provide 
larger loans in the future to help local businesses grow. 
 
¶17. (U) COMMENT:  The use of U.S. economic development resources to 
promote job creation, improving stability, and increased confidence 
in the Afghan government is a good investment in RC-N, where 
security threats are a growing concern.  USAID's Office of Economic 
Growth (OEG) will continue partnering with the Minister of Commerce 
and provincial governors to improve the business enabling 
 
KABUL 00003305  004.2 OF 004 
 
 
environment to encourage private sector-led growth.  USAID's Office 
of Infrastructure, Engineering and Energy (OIEE) is looking into 
funding a signature water project in Afghanistan's northern or 
western region.  The students, business people and credit union 
members were clearly enthused by their participation in the USG 
assistance programs and made clear their hopes that these 
opportunities could be extended to more Afghans.  End Comment. 
 
EIKENBERRY