VZCZCXRO7755
PP RUEHIK
DE RUEHBUL #3804/01 3331535
ZNR UUUUU ZZH
P 291535Z NOV 09 ZDS
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 3446
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0946
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEABND/DEA HQS WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 03 KABUL 003804 
 
C O R R E C T E D COPY (PARA MARKINGS AND TEXT) 
 
AIDAC 
 
DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A 
DEPT PASS AID/ASIA SCAA 
DEPT PASS USDA FOR FAS MICHNER 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS TDA FOR STEIN AND GREENIP 
DEPT PASS OPIC 
CENTCOM FOR CSTC-A, USFOR-A 
OSD FOR SEDNEY 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
SENSITIVE 
 
SIPDIS 
E.O.12958: N/A 
TAGS: PREL PGOV EINV EFIN ENRG ECON ETRD EAID AF FAS EAGR
BEXP, AF, TI 
 
SUBJECT: Commerce Minister Shahrani, Ambassador Wayne and Director 
Bill Frej visit Herat 
 
REF: (A) Kabul 2056  (B) Kabul 3305   (C) Kabul 03570 
 
KABUL 00003804  001.8 OF 003 
 
 
1.(U) SUMMARY: In a trip to Herat, Afghanistan's second largest 
commercial capital, a joint USG/GIROA delegation met with 
stakeholders to better assess Herat's economic potential and 
development needs.  Herat Governor Dr. Ahmad Yousuf Nuristani 
outlined the Province's priorities for continued infrastructure 
investment to strengthen an east-west trade corridor. During a site 
visit to a USAID women's cash-for-work program, the delegation 
gained insight into the need to link quick-impact assistance to 
medium-term vocational training in order to further build capacity. 
The delegation also launched the third provincial office of the 
Afghanistan Central Business Registry, which will reduce barriers to 
businesses entering the formal economy, and participated in a lively 
roundtable of Herati industrialists offering insights on the 
prospects and challenges to build Herat into a commercial and trade 
center.  The visit underscored both the vitality of the local 
business community and the need for concerted attention to foster 
the growth of Afghanistan's private sector.  END SUMMARY. 
 
THE GOVERNOR'S PERSPECTIVE 
 
2.(U) Starting off the November 15 visit, the delegates included 
Minister of Commerce and Industries (MOCI) Shahrani, Coordinating 
Director for Development and Economic Assistance (CDDEA), Ambassador 
Wayne, USAID Mission Director Frej, and Parliament National Economic 
Committee (NEC) Chairman Hajj Aziz Ahmad Nadem.  Governor Nuristani 
boasted of Herat Province's industrial and agricultural potential as 
Afghanistan's second largest commercial capital, and described 
further needs.  In the area of agriculture, Nuristani highlighted 
saffron production, which sells for USD 4,000 per kilogram, and 
pomegranate production -- for which there is high  demand in the 
West -- making them an excellent cash crop and solid alternative to 
opium poppy.  He mentioned his plan to train 250 farmers and 
agronomists in saffron cultivation and intention to build additional 
cold storage facilities for pomegranates and Herati grapes in order 
to facilitate exports.  The governor added that there is high demand 
for processed cotton in Iran, and that Afghanistan has enjoyed a 
strong harvest this year. 
 
3.(SBU) While Herat currently enjoys 24-hour electricity, further 
development of major dams would also strengthen the agriculture 
sector as well as experience of industry.  Regarding industry, 
Nuristani discussed the importance of Herat City's industrial park. 
He also noted that large marble reserves are located 175 kilometers 
from the Provincial Capital, and that the 47-megawatt Selma Dam, 
presently under construction near the marble reserves, should supply 
sufficient power for on-site quarry cutting and production. 
Additional infrastructure investments are required to make the 
sector profitable.  While Herat has large coal reserves, the 
governor expressed concern over environmental impacts.  At the heart 
of his plans for Herat to become a commercial and trade center, 
Nuristani pitched construction of an East to West Highway at least 
to the dam and marble mines as top priority, a new exhibition hall, 
and expansion of the Herat airport to include a new terminal to 
service international flights.  The road between Herat and Iran 
is also an important project which has Japanese and Central Asia 
Regional Economic Cooperation (CAREC) stakeholders funding, but the 
governor pointed out that completing the road will require an 
estimated USD 2 million for compensating landowners. (Comment: Land 
compensation is a Government of Afghanistan responsibility. End 
Comment.)  Finally, Nuristani stressed the need to support Herat's 
institutions of higher learning, for example, through building 
dormitories and establishing relationships with U.S. universities. 
In response to Governor Nuristani's interests, Ambassador Wayne and 
USAID Mission Director Frej reinforced U.S. support, in particular, 
for agricultural initiatives, the East to West Highway, and U.S. 
university connections. 
 
CASH FOR WORK SPURS POTENTIAL FOR VOCATIONAL TRAINING 
 
KABUL 00003804  002.6 OF 003 
 
 
 
4.(U) In the visit to a USAID-funded women's Cash-for-Work program, 
delegation members gained insights into the needs of quick-impact 
job creation programs.  This initiative sponsors 10 centers in 
Herat, each helping 30 of the poorest women in the district receive 
training in tailoring and salaries for one month.  Participants are 
paid USD 5 to 6 per day to produce school uniforms for needy girls 
who could not otherwise afford the uniforms.  The center produces 20 
schoolgirl uniforms per day, which encourages recipient children to 
attend school.  After one month, 30 additional women are enrolled in 
the program.  The goal for this type of center is to both provide 
skills and food for money to women who need both.  As a result of 
the visit, the program's implementers will explore the possibility 
of providing program graduates with sewing kits, at a cost of USD 40 
to 50 each, to encourage continued skill-building and possible 
self-employment. 
 
THIRD PROVINCIAL REGISTRY LAUNCHED 
 
5.(U) Delegation members officially opened Afghanistan's third 
provincial business registry.  The first provincial business 
registration office opened in Jalalabad, Nangarhar Province in July 
2009, followed by Mazar-e Sharif, Balkh Province in October 
(reftels).  The office in Herat will service entrepreneurs from 
Herat, Farah, Nimroz, and Ghor provinces, as a one-stop locale for 
complete business registration.  These steps include obtaining a 
Ministry of Finance tax identification number and publishing a 
business name in the Ministry of Justice official gazette for a 
single fee of 500 Afs (or USD 10) paid directly to the Central Bank. 
A business registration process that once took eleven steps and 
several weeks in Herat has shrunk to four steps in several hours in 
one location, thereby decreasing opportunities for corruption and 
increasing the credibility of government services. 
 
6.(U) As an added benefit, registered entrepreneurs will increase their 
potential to qualify for bank loans, attract investment, and 
accelerate customs clearances while the Afghan Government improves 
its official revenue base, data collection and reporting.  Minister 
Shahrani hailed the event as an important milestone.  Herat Governor 
Nuristani, Member of Parliament Aziz Nadem, and Provincial Director 
of the Afghan Investment Support Agency (AISA) Mr. Ahmad Tamim 
Kakarr praised and endorsed the reform.  The Ministry intends to 
expand this regulatory reform to the capitals of Kandahar, Khost, 
and Kunduz in the next months. 
 
INDUSTRIALISTS SHARE THEIR VIEWS 
 
7.(U) At the Five Star Hotel, the delegation held a roundtable 
discussion with businessmen, entrepreneurs, and association 
representatives.  Participants highlighted such needs as increasing 
space at the Herat industrial park, strengthening security, 
improving access to finance and credit, reducing trade barriers such 
as unreasonable tariffs and import duties, and enhancing the 
government's role in promoting trade of local goods and services. 
Local businesses also highlighted needed improvements to the 
agriculture sector and value chains in order to improve the economy 
of Herat and build employment opportunities throughout the country's 
western region. 
 
8.(U) As a next step, Minister Shahrani said that the Government is 
expanding the Ministry, creating new departments that will focus 
economic development at city levels to address such issues as 
improved trade and urban economic development.  The Minister also 
briefed attendees on a new Trade and Tariff policy which the Cabinet 
developed and approved, scheduled to come into effect the first 
quarter of 1389 (March 2010).  This policy will reduce import 
tariffs on inputs to production, which are currently relatively high 
and inhibit the development of the domestic industry.  Member of 
Parliament Nadem said that he would raise these issues with the 
National Economic Council.  Ambassador Wayne assured the 
 
KABUL 00003804  003.6 OF 003 
 
 
participants that the U.S. Government will support the establishment 
of an effective and strong private sector, which will pave the way 
for economic development and prosperity in the regions.  He 
explained the recently released "Afghan First" policy for US 
civilian and military purchases in Afghanistan, which was warmly 
welcomed.  Governor Nursitani concluded the session by stressing 
that actions are underway to address many of the concerns mentioned 
in the roundtable.  He said that the security situation has improved 
in recent months and that there has been a record increase in 
customs revenue during the past six months. 
 
9.(SBU) COMMENT:  Governor Nuristani is attuned to the vast 
opportunities for, and potential long-term benefit of, improving 
the business and investment climate in Herat.  His strategic vision 
runs the gambit - from needed infrastructure to attracting large 
industry investments to Cash-for-Work projects that could make a 
tangible impact in the lives of many women.  Even in the 
small-scale ventures, he has combined his vision of 
capitalizing on investments in the local industrial park with 
heartier investments in workforce development. The business 
community there shares an advanced understanding of the needed 
legislative and policy improvements that will allow not only the 
local economy to flourish, but for Herat to become an economic 
driver at the national level, and even internationally competitive. 
However, it was clear from the dialogue with this very vibrant group 
of Afghan businesspersons that it will take much ongoing work to 
create the right policy mix and supporting mechanisms to promote 
substantial growth with the private sector.  END COMMENT. 
 
EIKENBERRY