Identifier
Created
Classification
Origin
07KABUL1934
2007-06-11 12:36:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kabul
Cable title:  

AFGHANISTAN - AHADY CONSIDERS A/S SULLIVAN LETTER ON AFGHAN

Tags:  EFIN KCOR KPRV EINV EAID ECON PREL PGOV AF 
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VZCZCXRO1442
PP RUEHDBU RUEHIK RUEHPW RUEHYG
DE RUEHBUL #1934/01 1621236
ZNR UUUUU ZZH
P 111236Z JUN 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8645
INFO RUEATRS/DEPT OF TREASURY WASH DC
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4158
UNCLAS SECTION 01 OF 02 KABUL 001934 

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR GERBER AND KLEIN
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
CENTCOM FOR CG CFC-A
NSC FOR AHARRIMAN
TREASURY FOR LMCDONALD, ABAUKOL, AND JCIORCIARI
OSD FOR SHIVERS
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

E.O. 12958 N/A
TAGS: EFIN KCOR KPRV EINV EAID ECON PREL PGOV AF
SUBJECT: AFGHANISTAN - AHADY CONSIDERS A/S SULLIVAN LETTER ON AFGHAN
ANTI-CORRUPTION STRATEGY AND HESITATES ON PRIVATIZATION

REF: STATE 69427

(U) This message contains SENSITIVE BUT UNCLASSIFIED information.
Please protect accordingly.
UNCLAS SECTION 01 OF 02 KABUL 001934

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR GERBER AND KLEIN
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
CENTCOM FOR CG CFC-A
NSC FOR AHARRIMAN
TREASURY FOR LMCDONALD, ABAUKOL, AND JCIORCIARI
OSD FOR SHIVERS
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

E.O. 12958 N/A
TAGS: EFIN KCOR KPRV EINV EAID ECON PREL PGOV AF
SUBJECT: AFGHANISTAN - AHADY CONSIDERS A/S SULLIVAN LETTER ON AFGHAN
ANTI-CORRUPTION STRATEGY AND HESITATES ON PRIVATIZATION

REF: STATE 69427

(U) This message contains SENSITIVE BUT UNCLASSIFIED information.
Please protect accordingly.

1.(SBU) SUMMARY: Finance Minister Ahady is reviewing
anti-corruption proposals for his own ministry, including
recommendations for the customs department and to set up a ministry
"hot line." He expressed appreciation for EB Assistant Secretary
Dan Sullivan's letter and indicated that he would review the road
map again before responding. Ahady complained again about an
Attorney General investigation of the Roshan tax rationalization
agreement that Ahady claims increased government revenue from the
telecommunications sector, even though the Attorney General has said
that particular investigation has been suspended. (NOTE: Despite
these assurances, the MOF Director General of Revenue and an advisor
to Minister Ahady both insist that the investigation into this case
is ongoing. We will try to clarify. END NOTE.) Ahady worried that
reduction of staff in the tax department could prevent the
government from meeting its IMF revenue targets. Ahady advised that
under these circumstances he would be very hesitant to sign
privatization orders. If Ahady signs one such order on his desk, it
would put in motion negotiations that should allow Caterpillar's
local agent to expand its operations at a time that we expect
significant growth in the construction equipment sector. END
SUMMARY.


2.(SBU) On May 26, ECON Counselor delivered reftel letter to
Minister of Finance Ahady. He indicated his thanks for A/S

Sullivan's interest in the topic and commented that he had just
received a paper from his USAID-funded advisor containing
recommendations on some steps he could take to address corruption
issues inside the ministry. Without going into details, Ahady
advised that one recommendation was directed at the customs
department and the second was to establish an anti-corruption hot
line inside the ministry. Ahady thought the latter was a good idea,
but he expressed concern that it could be abused. ECON Counselor
suggested that if such a hot-line proved successful for the Finance
Ministry, the initiative could spread to the rest of the
government.

3.(SBU) Ahady said that he had reviewed elements of the road map
related to public finance, but wanted to go through the document
another time before responding to the letter. He noted that
Afghanistan's real corruption problem was government officials
taking payment for delivering services. As examples, he cited
bribery for issuance of passports and to negotiate reduction or
elimination of electricity bills, as well as payments to tellers to
process bank transactions.

4.(SBU) Once again, Ahady complained about harassment by the
Attorney General's office debilitating his taxation department.
Prosecutors, he said, had camped out in taxation department offices
for five months investigating the Roshan tax rationalization
agreement that Ahady claims increased revenue from the
telecommunications sector. (NOTE: Roshan is Afghanistan's largest
taxpayer. END NOTE.) Ahady said that due to fear of prosecution,
office employment had dropped from 35 to 14 employees. Ahady again
stressed his worries that the "interference" by the AG's office
would prevent the finance ministry from meeting the IMF revenue
targets for this coming year.

5.(SBU) Post's ROL Coordinator brought this concern to the
attention of the Attorney General, who responded that this
particular investigation has been discontinued. In addition, the
Attorney General advised ROL Coordinator that the General

KABUL 00001934 002 OF 002


Independent Administration Against Corruption, led by convicted U.S.
felon Ezatullah Wasifi, has referred several other cases to the AG
charging corruption in the MOF, including allegations of malfeasance
at the highest levels of the ministry.

6.(SBU) Ahady stated that he had a number of privatization orders on
his desk that he had no intention of signing because he feared that
the Attorney General might investigate him if a privatization
auction produced less money than the estimated value of the
enterprise. Ahady added that he planned to ask President Karzai for
authorization to sign the orders or some form of protection against
possible prosecution. He speculated that the government would only
privatize five state-owned enterprises this year instead of 15.

7.(SBU) ECON Counselor pressed Ahady to sign the privatization order
for the moribund state-owned wool weaving company. Allied,
Caterpillar's distributor in Afghanistan, leases land from the wool
weaving company. The MOF and Allied have negotiated terms under
which the lease would be transferred to the finance ministry upon
signature of the privatization order, and the lease would be
extended to a 20-year duration. This would give Allied the time and
space it needs to expand. In response, Ahady said the Allied
situation may need to be handled at the highest level. Allied has
estimated that this would pave the way for an additional $2.5
million investment (the company's current investment is estimated at
about 7.5 million, including equipment inventories).

8.(SBU) COMMENT: Ahady's policy paralysis on privatization and other
issues is cause for concern. At the macro level, the situation has
implications for revenue collection, budget sustainability, and
Afghan ability to pay ANA salaries as recruitment levels rise. At
the micro level, Ahady's expressed unwillingness to lead is holding
up the expansion of Caterpillar's agent in Afghanistan at a time
when the construction equipment market appears set to experience
significant growth.

WOOD