AFGHANISTAN COMPACT: PROGRESS ON LONDON CONFERENCE

UNCLAS SECTION 01 OF 03 KABUL 003532 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR SCA/FO, SCA/A, EB NSC FOR AHARRIMAN CENTCOM FOR CG CFC-A TREASURY PASS TO ANDY BAUKOL E.O. 12958: N/A TAGS: ECON EAID EFIN PGOV USAID SUBJECT: AFGHANISTAN COMPACT: PROGRESS ON LONDON CONFERENCE BENCHMARKS GETS MIXED REVIEW AT SECOND JOINT COORDINATION AND MONITORING BOARD MEETING REF: KABUL 3349 AND PREVIOUS ¶1. (SBU) Summary: Donor representatives used the second Meeting of the Afghan Compact's Joint Coordination and Monitoring Board (JCMB) to press for government action in key areas including energy reform, anti-corruption, and rule of law. GoA interventions highlighted the need for emergency fuel assistance to head off a winter electricity crisis, and promised initial steps on longer-term energy reform. The Afghans also sought donor support for their Policy Action Group initiative to step up assistance in the South. The session briefly touched on the GoA's recent appeal for food assistance, and condemned the razing of schools by the insurgency. Co-chairs Koenigs and Nadiri asserted that the JCMB is proving its worth, citing the informal donor efforts to advance police reform and more recently to engage the Afghans on energy strategy. Participants agreed that an expanded progress report on the London Conference benchmarks would be prepared for the next full JCMB session, tentatively scheduled for November 5. End Summary. ¶2. (SBU) GOA senior economic advisor and Joint Coordination and Monitoring Board (JCMB) co-chair Israq Nadiri and his UNAMA counterpart, SGSR Tom Koenigs, convened the second formal meeting of the JCMB on July 30. First Vice President Ahmed Zia Massoud's opening remarks highlighted GoA concerns about deteriorating security in the South, as well as the need for additional donor assistance in the energy sector. GoA co-chair Nadiri echoed that security and reconstruction needs confronting the government are increasingly urgent, as well as interdependent. Reviewing recent steps to create an inter-ministerial Energy Board chaired by Senior Minister Arsala, Nadiri warned that inadequate electricity this winter would likely feed popular dissatisfaction. ¶3. (SBU) Through its role in integrating development and financial planning, Nadiri saw the JCMB as central to addressing these challenges. UNAMA SGSR Koenigs acknowledged that the challenges confronting the GoA are sizeable. He said that the JCMB had already proved its worth in some areas, citing funding for changes in police reform and more recently energy strategy as areas where informal exchanges have helped to get policy more on track. He had serious concerns, though, in other areas such as lack of progress in tackling corruption and judicial reform, and the need for additional work on private sector development. ¶4. (SBU) Interventions by Minister of Foreign Affairs Spanta and National Security Adviser Rasoul accentuated the meeting's focus on linkage between security and development. Rasoul sought donor support for the GoA's Policy Action Group (PAG) initiative to integrate security, intelligence, reconstruction, and public communication efforts in Southern Afghanistan. Key challenges to security included lack of control of Afghan borders, drug trafficking by insurgents, and inability to deliver basic government services in the provinces. Education Minister Atmar recounted increased targeting of schools by insurgents, citing 202 attacks already in 2006 against schools in 27 Afghan provinces. In six Southern provinces, 208 schools had closed, denying education to some 100,000 children. The GoA was taking measures to address this, including setting up school protection teams under the direction of provincial governors, and would welcome donor support to rehabilitate and reopen schools. ¶5. (SBU) Finance Minister Ahady reviewed efforts to improve the budget process and enhance aid effectiveness. His ministry is trying to link spending to Afghan National Development Strategy (ANDS) priorities. By September he anticipates setting budget ceilings for each ministry. He identified key ANDS priorities as: A) Infrastructure; B) Police and Security; KABUL 00003532 002 OF 003 C) Governance and public sector management; and D) Human resources and education. Ahady also raised the GoA's recent appeal for food assistance through the World Food Program, in response to the return to drought conditions in much of the country. ¶6. (SBU) On energy needs, Ahady appealed for fuel support to meet short and medium-term electricity requirements, noting that it takes several years to bring new power generation and transmission on stream. Estimating diesel requirements for the coming winter at about $60 million, Ahady identified three financing options: a) getting external financial support from a new donor; b) finding a donor willing to provide diesel fuel directly; or C) reallocating funds from existing sources, such as the World Bank's Afghan trust fund (ARTF). ¶7. (SBU) Energy and Power Minister Ishmael Khan said that the GoA's energy strategy includes introducing new billing systems and future privatization of the main power plant in Kabul. Senior Minister Arsala, named to head the new inter- ministerial energy board, said the GoA understands that continued donor support in this sector will be conditioned on reform. He described the key elements of the GoA's plan: 1) restructuring of the national energy authority; 2) establishing a cost recovery system for electricity; 3) legal reforms to facilitate private energy investment; 4) building staff capacity, including salary reform, and 5) promoting alternative sources and rural electrification. ¶8. (SBU) World Bank Country Director Alistair McKechnie welcomed the GoA's commitment to develop an energy strategy. He downplayed, however, any possibility of dipping into the ARTF to subsidize short-term needs, saying this would likely violate conditions set by donors. In lieu of ARTF, he encouraged the GoA to seek support from friendly oil producing countries. Alternatively, he offered, it may be possible to tap into Asian Development Bank energy sector funding. ¶9. (SBU) The JCMB co-chairs circulated for discussion a revised progress report on the most immediate Afghan Compact benchmarks (NOTE: The report addresses only those eleven benchmarks with deadlines targeted by March 2007. The self- assessments by sectoral Working Groups use a tri-color scheme -- green, yellow, red -- to grade GoA progress. A copy has been provided to the SCA Afghan desk. END NOTE.) Based on donor characterization of an earlier draft as far too sanguine (see reftel),the revised report now identifies four benchmarks as falling into the yellow warning zone: a) the senior appointments benchmark for establishing a transparent mechanism for filling key Government posts; b) review of administrative boundaries; c) establishing a legal framework for mining and natural resource development; and d) enactment of legal protections for private sector development and trade. ¶10. (SBU) Ambassador called for steadfast international engagement to help the GoA, and for the GoA to match this with actions. He pointed to the GoA's energy difficulties to emphasize the cost of avoiding tough decisions. The EU, U.K., and Japanese Ambassadors agreed that the JCMB must focus on results. Donors cited benchmarks on anti- corruption; rule of law; the justice sector, and DIAG as among those requiring urgent action. An obvious shortcoming of the report, pointed out by several donors, is its failure to address the many benchmarks with deadlines beyond the report's initial 12 month timeframe. ¶11. (SBU) SRG Koenigs agreed that an expanded progress report, looking out beyond twelve months, should be prepared for the next full session of the JCMB, tentatively scheduled for November 5. He appealed for greater donor engagement with the GoA in monitoring the benchmarks and asked that KABUL 00003532 003 OF 003 donors be more assertive in raising specific concerns through the JCMB process. NEUMANN