PRT KUNAR: SOVIET-STYLE SALE OF EAST AFGHAN TIMBER

UNCLAS SECTION 01 OF 03 KABUL 003570

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR SCA/FO, SCA/A
NSC FOR AHARRIMAN
CENTCOM FOR CG CFC-A

E.O. 12958: N/A
TAGS: SENV ECON AF
SUBJECT: PRT KUNAR: SOVIET-STYLE SALE OF EAST AFGHAN TIMBER
STOCKPILE

Summary
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1. (SBU) Cracking down on illegal timber cutting and
smuggling has been one of Kunar's outgoing governor's most
important achievements. He strictly enforces Karzai's
decrees on that matter. According to his interpretation,
however, no individual can transport wood without the GoA's
express permission. Tens or hundreds of millions of dollars
of wood, mostly cedar, now lie in the timber yards of Kunar
province in eastern Afghanistan. The GOA has a Soviet-style
plan to buy up all the wood, at a price to be determined by
Kabul, and then sell the timber to the highest bidder, most
likely international wood concerns. The potential for graft
and corruption is high. Many local government and tribal
leaders do not support this plan. Some advocate allowing
market forces to work their magic, while others desire the
GOA to donate the logs for construction of housing for poor
Afghans. Karzai's government must make smart choices on
what to do with Kunar's, and Nuristan's, lumber and devise,
in coordination with international partners, a long-term
reforestation and tree-harvesting program for a sustainable
lumber industry. End Summary.

Timber: Possible engine for economic growth?
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2. (U) The main economic activity in Kunar province
currently is subsistence farming, the means of livelihood
for over ninety percent of the population. But the trees of
Kunar, particularly its nakhtar cedars, may be a potential
source for economic development in the long term. Other
potential economic opportunities are gemstone mining and
electricity production from the two main rivers, the Pech
and the Kunar. Locals hope the GOA will be able to harness
these rivers to produce power for half the country.


3. (U) Sixty percent of Afghanistan's forests lie in the
eastern region of the country, primarily in Kunar and
Nuristan with limited forests in Nangarhar and Laghman
provinces. Nakhtar cedar trees, prized for use in
construction and furniture-making in Afghanistan and
Pakistan, are found at higher elevations in both Kunar and
Nuristan. Other trees growing naturally in Kunar include
walnut, eucalyptus, and various citrus and other fruit
trees. Depending on quality and species, wood merchants
today sell Kunari cedar in downtown Asadabad, the provincial
capital, for $4 to $20 per cubic foot.

Illegal harvesting of trees
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4. (SBU) Before the civil war of the early 1990s, under
Afghan law, the Ministry of Agriculture monitored the
harvesting of trees and required that new saplings replace
the felled timber. This system collapsed during the civil
war. The current Director of Economy for Kunar and others
state that rich Pakistanis, then and now, are behind the
timber smuggling business throughout the province. Others
spread the blame a bit more broadly, pointing the finger at
merchants from Paktiya, Kandahar, Nangarhar, and elsewhere,
including some Kunaris.


5. (SBU) After the fall of the Taliban, Karzai banned
lumber harvesting in Afghanistan, though in Kunar this was
not enforced by the first two post-Taliban governors,
warlord Jahn Dod and the Afghan-American Sayid Fazil Akbar.
Akbar took a laissez faire approach, allowing wood to flow
relatively freely within the province as long as individuals
paid the appropriate taxes, which helped fund the building
of a new mosque in downtown Asadabad, enriched warlords and
local officials. It is unclear if any connection existed
between enemy forces and the illegal timber trade.

Governor Wafa's (mostly successful) crackdown
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6. (SBU) When Governor Wafa came to Kunar in February 2005,

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he cracked down on the illegal harvesting of trees in Kunar
and strictly enforced the ban on the transport of lumber,
stifling a means of livelihood for many inhabitants of this
province, particularly in the unstable Korengal Valley and
the northeastern districts. This had a drastic effect on
the local economy, according to the provincial Finance
Director, with Kunar's total revenues sent to Kabul dropping
from $5 million two years ago to only $300,000 last year.
(In comparison, last year's total provincial budget was $7
million, with approximately 70% of that going to salaries of
government employees.)


7. (SBU) Nevertheless, smuggling on a lower scale
continues. Kunari warlords who served in government
positions before the arrival of Governor Wafa in February
2005 - Afghan Militia Force (AMF) commander Malik Zarin,
border brigade commander and former governor Jahn Dod, and
to a lesser extent ANP chief Matiollah Khan - and who all
still have close ties to Karzai played key roles in the
exploitation of Kunar's (and Nuristan's) woodlands. They
are all presumably still involved in timber smuggling, and
may be lobbying hard for the solution to the timber issue
that would leave the most money in their coffers.

Kabul's Soviet-style plan for Kunar's timber
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8. (SBU) In late December 2005, Karzai's government issued
a decree spelling out what to do with the millions of feet
of wood piled up in Kunar and Nuristan. A commission made
up of various ministries from Kabul spent weeks earlier this
year cataloguing the timber in Kunari lumberyards. The
Economy Director criticized the commission's accounting
methods. He says their figure of around 10 million cubic
feet understates the amount of lumber by approximately 5
million. Going with an extremely conservative estimate of
200 afghani ($4)/foot, the going rate for low quality cedar,
the woodlots of Kunar contain at least $40 million worth of
timber. The actual market value is likely in the hundreds
of millions of dollars.


9. (SBU) The commission in Kabul (including the heads of
some of the Ministries of Finance, Agriculture, and
Interior) plans to take a very Soviet-like approach to solve
the timber problem, determining the appropriate price to pay
the dealers for their product, buying up and collecting all
of Kunar's (and Nuristan's) timber, and finally - with a
belated nod to Adam Smith and the market system - selling
the wood at a mark up of perhaps, according to the Finance
Director, thirty percent. (A Dutch firm apparently made
inquiries into purchasing $3 million of timber back in
February.)


10. (SBU) Kunar's Economy Director, Deputy Governor for
Administration, Agriculture Director and other officials
have all advised Kabul against this plan, but the central
government will proceed anyway. These local officials would
have preferred allowing market forces to determine prices
and buyers. Kunar's elders and members of Parliament, on
the other hand, claim that the wood sitting in the woodlots
of this province should be used to build homes and other
buildings for the poor citizens of Afghanistan. It is
unlikely, however, that Kunar's timber yard owners,
including some powerful local figures and at least one
member of parliament, would have allowed this sort of
giveaway.

Comment
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11. (SBU) It remains to be seen whether this arrangement,
rife with opportunities for corruption and insider deals,
will be able to set the province's timber industry in motion
and generate some decent income for the GoA. The GoA has
been wrestling with the question of what to do with Kunar's
timber since Karzai's first decree on the subject when he
first took office. If the GoA doesn't act soon, the wood,
ostensibly chopped down some time before Wafa's arrival

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almost eighteen months ago, may begin to rot. Presuming the
wood is sold off in the near future, which is not a sure bet
by any means, there is still no plan for the development of
the timber sector. GOA and NGO efforts at reforestation
thus far have been on an extremely small scale. The dream
of Kunar's cedars becoming an engine for economic growth is
decades away.
NEUMANN