TAJIKISTAN'S NEW CABINET INCLINED TO SUPPORT ECONOMIC GROWTH

C O N F I D E N T I A L SECTION 01 OF 03 DUSHANBE 002205 SIPDIS SIPDIS E.O. 12958: DECL: 12/11/2016 TAGS: PGOV PREL PINR ECON EAIR ENRG EAID ETRD TI SUBJECT: TAJIKISTAN'S NEW CABINET INCLINED TO SUPPORT ECONOMIC GROWTH AND REFORM REF: A) DUSHANBE 2171 B) DUSHANBE 2201 CLASSIFIED BY: Tracey Ann Jacobson, Ambassador, U.S. Embassy, Dushanbe, State. REASON: 1.4 (b),(d) ¶1. (C) SUMMARY: Tajik and foreign observers agree Tajikistan's economy and infrastructure need a total overhaul. President Rahmonov's November 30 governmental restructuring and early December cabinet appointments to economic positions suggest he understands that he needs a competent set of advisors to improve Tajikistan's business environment and attract foreign investment. He appointed some experienced, reform-minded officials to head the Ministries of Economic Development, Agriculture, and Transportation and Communications. He also established new independent entities, such as the Customs Service, Tax Committee, and Agency to Fight Corruption, that could implement administrative reforms to help small businesses and spur economic growth. ¶2. (C) U.S.-funded programs in business and agriculture will likely continue at the same pace or flourish under the new cabinet. With a few exceptions, the new ministers' record of support for U.S. economic development and assistance priorities suggest we could have a fruitful relationship on economic cooperation, if the new ministers are given the authority to implement much needed but painful reforms. ¶3. (C) One exception to the progressive trend is Rahmonov's choice for Minister of Energy and Industry -- a personal favorite of the president with a bad reputation for corruption. However, energy policy will continue to rest largely in the hands of Deputy Prime Minister Ghulomov. Although Rahmonov's new economic team consists more of loyal allies from his home region of Kulob than Tajikistan's brightest economic minds, the restructuring indicates Rahmonov recognizes fiscal responsibility and sound economic policy are the only way to bring Tajikistan forward. We will need a few months to see whether the new government structure ushers in reform and growth, or simply provides a different way for the top echelon to line their pockets. END SUMMARY. ¶4. (U) This cable on economic and social institutions is one of four cables examining the impact of Tajikistan's restructured government and President Rahmonov's new cabinet on U.S bilateral and regional priorities (Ref A). The other reports look at bilateral and regional security issues (Ref B),democracy and human rights, and the bigger picture of Tajikistan's future. THE GOOD NEWS ¶5. (C) Rahmonov did little to bring new blood into his administration after winning a second seven year-term as president November 6, but he did shift some reform-minded officials to new positions: -- Minister of Economic Development and Trade Guljomon Boboyev: The former Minister of State Revenues and Taxes now heads a new ministry, focused on Economic Trade and Development. -- Minister of Agriculture and Environmental Protection Abdurahim Qodirov: As chairman of Zafarabod district in Sughd region, Qodirov dramatically overhauled the cotton and agricultural sectors, improved irrigation systems and expanded entrepreneurship and trade. He has been open and supportive of collaboration with donors. He will likely support current USAID projects in agribusiness, land reform and crop diversification. -- Minister of Transportation and Communication Abdurahim Ashurov: Ashurov retains control of his former Ministry of Transportation, but takes on Communications and Civil Aviation (which one of his staff members described to us as "a real mess"). The outgoing Minister of Communication Said Zuvaidov had allowed more private sector investment, but was closely linked to several Chinese telecoms doing business in Tajikistan. He likely profited greatly from his telecom connections and some suggested he "got greedy." Zuvaidov was also behind government efforts to create a single information gateway to control information flow. Ashurov has thirty years of experience in transportation and roads and is known as a DUSHANBE 00002205 002 OF 003 workaholic with a loyal and talented staff. He has been very supportive of the U.S.-funded bridge at Nizhniy Pyanj. -- Minister of Land Reclamation and Water Masaid Hamidov: Former minister, Abdukohir Nazirov, an excellent partner particularly on cross border issues with Afghanistan, now heads the northern Sughd region, but his replacement comes with a good technical background and reputation. Before his last posting as First Deputy Mayor in Dushanbe, Hamidov previously served as First Deputy Minister of Land Reclamation and supported the USAID-funded Water Users Associations Support Program. -- Governor of Sughd Region Abdukohir Nazirov: As former Minister of Land Reclamation and Water, Nazirov was instrumental in working with post on a number of issues, including Water Users Associations and Memoranda of Understanding with the Afghan government on water management agreements. The outgoing governor, Kasim Kasimov, while reform-minded, frustrated many northern Tajiks with his bureaucratic style. Post's political assistant, who was in Khujand when the appointment was made, reported that businessmen and NGOs in Sughd are delighted that someone as "clean" as Nazirov would take the helm. For U.S. projects in the north, this may improve cooperation. -- Minister of Foreign Affairs Hamrokhon Zaripov: Well known to Washington circles, the former Tajik Ambassador to the U.S. is rumored to run things much stricter at the MFA than outgoing FM Talbak Nazarov, based on what Zaripov experienced during his tenure in Washington. We hear rumors that MFA employees are jockeying to remain in their posts or move up. THE BAD NEWS ¶6. (C) Minister of Energy and Industry Sherali Gulov: Formerly the head of the highly lucrative Committee on Investments and State Property, Gulov is thought to be smart, but incredibly corrupt. Now as head of the newly-consolidated ministry, Gulov replaces two ministers who worked well with the Embassy: former Energy Minister Abdullo Yerov and former Industry Minister Zaid Saidov. Because Deputy Prime Minister Ghulomov retains true control over Tajikistan's energy policy, we anticipate U.S. engagement on energy and electricity policies will remain the same, although we may encounter more difficulties on a working level with the new ministry. THE KNOWN UNKNOWNS ¶7. (C) Tax Committee and Customs Service: Rahmonov's restructuring broke up the Ministry of State Revenues and Taxes into a Tax Committee and Customs Service that report directly to the central government. Hakim Soliev, the former Minister of Economy and Trade, will head the Tax Committee, and Gurez Zaripov, the former Deputy Minister of State Revenues and Taxes, will lead the Customs Service. Tojikstandart, the agency that creates and defines all industrial standards, is now also an independent body, removed from the Ministry of Economy. ¶8. (C) The restructuring created independent bodies which may be able to implement reform faster, but it also removed a layer of oversight from highly lucrative and corrupt agencies, and streamlined the flow of revenue straight to the top. Tojikstandart in particular has been historically a difficult agency, creating many barriers to trade and imports and demanding additional payments and bribes from companies trying to comply with Tajikistan's arcane industrial standards regulations. Its independence could be bad sign for Tajikistan's accession to the WTO. ¶9. (C) Minister of Health Rano Abdurahmonova replaces Nusratullo Faizulloev. The only female cabinet member, Abdurahmonova has served as a deputy health minister but transferred to head the Health and Women's Affairs Department of the Presidential Administration after supposedly falling out with Faizulloev. Faizulloev actively supported U.S.-funded health projects, and was available on a variety of issues, including water sanitation and avian influenza. Abdurahmonova has a mixed reputation-it is unclear whether we will enjoy the same access and open relationship with her. NO GAIN, NO LOSS ¶10. (C) Other top officials remain in place: DUSHANBE 00002205 003 OF 003 -- Prime Minister Oqil Oqilov will continue to serve as a figurehead of government. -- First Deputy Prime Minister Asadullo Ghulomov retains his portfolio over energy, construction and investment. Ghulomov knows how to talk the regional energy talk, but his lack of support for government commitments on electricity cost recovery, particularly at the small Pamir-I project, indicate he is most interested in building big hydropower stations and less interested in getting Tajikistan's messy state electricity utility in order. -- "Barqi Tojik" Chairman Sharikhon Samiev remains at the helm of the Tajik state-owned electrical utility. Rumored to be President Rahmonov's driver's sister's husband, Samiev was previously the Chairman of Dushanbe district and brought little formal training or energy experience when he assumed the position in April 2006. Barqi Tojik claims it has a 90 percent cost recovery rate (which we sincerely doubt). The increased electricity shortages in Dushanbe, and the blackouts throughout most of the country, suggest that much more needs to be done to regulate Tajikistan's electricity sector. -- Minister of Finance Safarali Najmuddinov. With economic policy decisions largely made at the National Bank or the Presidential Administration, Najmiuddinov has not played a large role in the overall economic strategy. He will assuredly continue to press the U.S. for debt relief. Najmuddinov has also formally requested U.S. technical assistance. -- National Bank Chairman Murotali Alimardonov: A chief rival to First Brother-in-law Hasan Saidulloev, (who was rumored to be lobbying to fill the chairman's seat),Alimardonov is deeply involved in the cotton sector. Like Saidulloev, Alimardonov owns or controls a number of futures companies -- Minister of Education Abdujabbor Rahmonov: While generally supportive of certain U.S. funded projects, he did nothing to prevent his ministry from shutting down the successful ABA CEELI civil education "Street Law" project in October 2005. He has also been reluctant to allow our implementing partners to use university campuses to recruit for exchange students or host U.S.-sponsored speakers. --State Advisor on Economic Affairs Matlubhon Davlatov: The former head of the State Property Committee retains his position in the Presidential Administration. --State Advisor on International Affairs Erkin Rahmatulloyev: This close contact of the Embassy retains his position in the Presidential Administration. ¶11. (C) COMMENT: Unlike in the security sector, where hardline neo-Soviets have consolidated their control, Rahmonov's appointments in the economic sector suggest he intends to continue on a slow path to reform with trusted loyalists implementing the changes. USAID and other U.S. programs to improve the business and regulatory environment stand a good chance of succeeding with this team. Our health and education programs should stay on track, regardless of the ministers' inclinations, but only with the necessary funding levels. Several health and education initiatives will likely be cut due to U.S. budget constraints. ¶12. (C) As long as Deputy Prime Minister Ghulomov retains ultimate authority over energy policy, Tajikistan will support U.S. regional energy integration policies. On a working level, U.S. and other companies looking to enter the Tajik market will have to deal with Minister of Energy and Industry Gulov, who may prove more problematic and less transparent than the previous ministers. END COMMENT. JACOBSON