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;

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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

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donors be more assertive in raising specific concerns
through the JCMB process.

NEUMANN