Identifier
Created
Classification
Origin
06KABUL3305
2006-07-26 13:05:00
CONFIDENTIAL
Embassy Kabul
Cable title:  

AFGHANISTAN - EB ASSISTANT SECRETARY SULLIVAN

Tags:  ECON ETRD EINV EAID PGOV AF 
pdf how-to read a cable
VZCZCXRO1825
PP RUEHDBU
DE RUEHBUL #3305/01 2071305
ZNY CCCCC ZZH
P 261305Z JUL 06
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 1533
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCNAFG/AFGHANISTAN COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHDC 0095
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC
RHEHAAA/NSC WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHINGTON DC
NOFORN
C O N F I D E N T I A L SECTION 01 OF 03 KABUL 003305 

SIPDIS

SIPDIS

DEPARTMENT FOR EB/FO, EB/TPP, SCA/FO, SCA/A, AND SCA/CEN
TREASURY PASS TO ANDY BAUKOL
NSC FOR HARRIMAN
CENTCOM FOR CG CFC-A

E.O. 12958: DECL: 07/27/2016
TAGS: ECON ETRD EINV EAID PGOV AF
SUBJECT: AFGHANISTAN - EB ASSISTANT SECRETARY SULLIVAN
PROMOTES RECONSTRUCTION OPPORTUNITY ZONES AND REGIONAL
ECONOMIC COOPERATION

Classified By: Deputy Chief of Mission Richard Norland

C O N F I D E N T I A L SECTION 01 OF 03 KABUL 003305

SIPDIS

SIPDIS

DEPARTMENT FOR EB/FO, EB/TPP, SCA/FO, SCA/A, AND SCA/CEN
TREASURY PASS TO ANDY BAUKOL
NSC FOR HARRIMAN
CENTCOM FOR CG CFC-A

E.O. 12958: DECL: 07/27/2016
TAGS: ECON ETRD EINV EAID PGOV AF
SUBJECT: AFGHANISTAN - EB ASSISTANT SECRETARY SULLIVAN
PROMOTES RECONSTRUCTION OPPORTUNITY ZONES AND REGIONAL
ECONOMIC COOPERATION

Classified By: Deputy Chief of Mission Richard Norland


1. (U) Meeting attendees from the USG:
Assistant Secretary for Economic and Business Affairs
Daniel Sullivan
OPIC, Deputy Chief of Staff, Dulce Zahniser
State, Bilateral Trade Officer, Mary Beth Goodman
Econ Counselor, Jack Spilsbury
Tradeoff, Robert Newsome

AFGHAN MFA:
Afghan Deputy Foreign Minister Mahmoud Saikal
Executive Assistant, Nasir Andisha



2. (SBU) SUMMARY: EB Assistant Secretary Daniel Sullivan and
Deputy Foreign Minister Saikal focused their July 15
discussion on regional economic cooperation, the Afghan
investment climate, and particularly the U.S. Reconstruction
Opportunity Zone (ROZ) initiative. A/S Sullivan clarified
the potential benefits of ROZs and discussed possible GoA
roles in developing and realizing them. Depmin Saikal
praised President Bush,s initiative, but underscored Afghan
fears that Pakistan would try to dominate ROZ development at
Afghanistan,s expense. A/S Sullivan encouraged the Afghans
to put forward their own thinking on eligible products and
potential locations, in parallel with the work of a USAID
study team. On regional integration, Depmin Saikal announced
that India will host a Regional Economic Cooperation
Conference on Afghanistan November 18-19 in New Delhi to
bring together G-8 and SCA governments, as well as a private
sector component, to promote investment in regional energy,
trade and transit, transport, and agriculture. END SUMMARY

-------------- --------------
REGIONAL ECONOMIC INTEGRATION AND RECC CONFERENCE IN NEW DELHI
-------------- --------------


3. (U) Assistant Secretary for Economic and Business Affairs
Daniel Sullivan opened his July 15 meeting with Deputy

Minister of Foreign Affairs Mahmoud Saikal by emphasizing the
importance the USG and the Assistant Secretary attach to
promoting economic reconstruction and development in
Afghanistan as a critical element of its security and
democratic transition. A/S Sullivan underscored the
importance of promoting trade, private investment and
regional economic integration. He noted he had just
participated in the opening of the Baku-Tblisi-Ceku (BTC)
pipeline, which demonstrated how years of concerted efforts
in a nearby region had yielded a transnational project
benefiting all participating countries.


4. (U) Saikal, who heads the MFA,s economic division, agreed
that regional economic cooperation is a significant GoA
foreign policy priority. He announced Afghanistan is working
with India on a Regional Economic Cooperation Conference
(RECC) focusing on Afghanistan in New Delhi November 18-19.
The conference follows the RECC conference organized by the
GoA in Kabul in December 2005, with participation by
neighboring governments and the U.S. Saikal described the
upcoming New Delhi meeting as a huge opportunity for the GoA
to push regional economic integration in energy, trade and
transit, and transport all covered by the Kabul conference,
as well as agriculture, added as a fourth item to the New
Delhi agenda. An initial planning meeting has been held and
the Indians intend to extend invitations to G8 and regional
governments.

(U) Saikal also reported that New Delhi will include a
parallel private sector event to promote foreign investment.
He said the MFA has asked the Afghan Investment Support
Agency to prepare materials detailing specific
regionally-focused business opportunities in the four sectors
in Afghanistan.


KABUL 00003305 002 OF 003



5. (SBU) Saikal noted that Afghanistan had recently joined
the South Asian Association for Regional Cooperation SAARC).
The GoA planned to press Pakistan to abide by SAARC free
trade provisions and allow the free flow of goods across its
territory between Afghanistan and India. (Note: Currently,
Pakistan generally prohibits transit of Indian goods destined
to Afghanistan. End note.) He also said the GoA was
considering whether to formally renegotiate the 1965 Afghan
Transit Trade Agreement with Pakistan.


6. (SBU) Saikal hoped reconstruction of Afghanistan,s Ring
Road would foster economic integration with its neighbors,
including by enhancing security along the route. He also
cited a Tajik power corridor through Afghanistan to provide
hydro power to Pakistan, and an
Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, as
regional energy proposals the GoA is interested in to develop
its role as a "landbridge" between Central and South Asia.
On TAPI , he reported interest from India, but said that the
contentious India-Pakistan relationship poses a major
obstacle to the project. On the investment climate, the
Deputy Minister concluded that Afghanistan is enjoying steady
economic growth, lowered inflation and a rise in revenue
collection that is now paying for over half of the GoA,s
operating budget. However, the effects of the drug trade and
the security issue were negative economic factors, and would
require both internal and international solutions.


7. (U) Sullivan responded that the US backs Afghan efforts
to promote regional economic cooperation. He noted that the
recent reorganization of the Department's South and Central
Asian Bureau demonstrated the importance Washington placed on
strengthening regional ties. Central and South Asia
Regional Economic Integration Initiative is a priority for
Under Secretary of State Shiner, and the US actively
encourages GoA participation in all regional fora, such as
the recent TIFA conference in Almaty. The US supports the
proposal to bring electricity to Afghanistan from Central
Asia, and believes that the development of the Afghan private
sector is essential to economic growth.

-------------- --------------
ENGAGING THE AFGHANS ON RECONSTRUCTION OPPORTUNITY ZONES
-------------- --------------


8. (C) Saikal praised President Bush,s initiative to
create Reconstruction Opportunity Zones. He said duty-free
access to the US market could help generate jobs and improve
security: "Terrorists can't recruit Afghan youth if they are
employed." He stated that ROZs could directly promote US and
Afghan interests in the war on terror, but emphasized that
for the program to truly benefit Afghanistan, the GOA "will
insist that any ROZ factories must be on the Afghan side of
the border with Pakistan." Saikal said Afghan reconstruction
needs were a greater priority than Pakistan's and highlighted
political concern within the GoA that Afghanistan must have
the lion's share of the ROZ factories to prevent Pakistani
control or dominance of the program.


9. (SBU) A/S Sullivan responded that the initiative is meant
to be a win-win situation. The objective is for Afghanistan
and Pakistan to build cooperative economic linkages that will
benefit both countries. He described the economic benefits
derived by Jordan from its Qualified Industrial Zones (QIZs)
with Israel, on which the ROZ concept is largely based.
Likewise, the more recent Egypt/Israel QIZ is already having
a positive impact on Egypt's economy. To allow the Afghans
to better understand the opportunities presented under the
ROZ proposal, Sullivan announced that USAID is prepared to
fund a GoA team to travel to Jordan to evaluate its QIZs.


10. (SBU) A/S Sullivan clarified that the U.S. proposal is
not limited to establishing a single ROZ location or to the
Afghan-Pakistani border region. Most likely, he said,
proposed ROZs in Pakistan would be on or near the Afghan

KABUL 00003305 003 OF 003


border, while those in Afghanistan could in principle be
located virtually anywhere in the country that made economic
sense. He agreed the ROZ program should not be dominated by
Pakistan, but stressed that the objective of the ROZs is to
ensure benefits for both Afghanistan and Pakistan. He
encouraged Afghanistan to fully engage its own thinking
during the design phase. He indicated that USAID would be
launching a study to help identify geographic areas and
products for ROZs in both countries. He anticipated that the
study team would arrive in Afghanistan in early September,
and stressed the importance of the GoA reviewing its thinking
on these questions before the team's arrival.


11. (U) A/S Sullivan pointed out that Afghanistan currently
enjoys broad access to GSP preferences for approximately 3000
Afghan-made products for export to the US. He said the GoA
should consider which of its products not benefiting from GSP
preferences that it would like to export to the U.S. through
ROZ factories. He said the U.S. would like to receive a
specific proposal from the GoA regarding manufactured
products that it wished to be eligible. He reiterated that
the ROZs were not envisioned as competition with Pakistan,
but rather a joint opportunity for both countries. A/S
Sullivan also emphasized that the GoA would need to
energetically support the creation of ROZs. Lack of
enthusiasm would impact our ability to generate necessary
support for the concept, notably with Congress.
NEUMANN