2008 U.S.-CENTRAL ASIA TIFA COUNCIL MEETING

UNCLAS SECTION 01 OF 05 DUSHANBE 000895 SIPDIS SENSITIVE DEPARTMENT FOR SCA/CEN USTR FOR MARK MOWREY AND ELIZABETH HAFNER DEPARTMENT OF COMMERCE FOR DANICA STARKS E.O. 12958: N/A TAGS: ETRD USTR ECON PREL AF KG KZ TI TX UZ SUBJECT: 2008 U.S.-CENTRAL ASIA TIFA COUNCIL MEETING REF: 2007 STATE 117583 This message is sensitive but unclassified. Please protect accordingly. ¶1. (SBU) SUMMARY: The fourth meeting of the U.S.-Central Asia Trade and Investment Framework Agreement (TIFA) Council, held June 17-18 in Dushanbe was marked by strong participation by the private sector and by Afghan observers. However, representatives from the TIFA members themselves failed to address issues raised by private sector and NGO participants and the discussion sessions elicited little discussion. Kyrgyzstan did not even send a representative from the capital. While the delegations did not officially adopt the draft Action Plan for further cooperation, they promised to send their comments on it to USTR, which could lead to adoption of the action plan later this summer. END SUMMARY. ¶2. (U) The Delegations: AFGHANISTAN (OBSERVER) -- Mr. Azim Mukhammad, Head of the Directorate of International Trade and Industry KAZAKHSTAN -- Mr. Almas Kosunov, Deputy Minister of Industry and Trade KYRGYZSTAN -- Mr. Turatbek Esenkulovich Djunushaliev, Ambassador of Kyrgyzstan to Tajikistan. TAJIKISTAN (HOST) -- Mr. Gulomjon Bobozoda, Minister of Trade and Economic Development TURKMENISTAN -- Mr. Kurbanmurad Kurbanmuradov, Minister of Economy and Development UNITED STATES -- Mr. Mark Mowrey, Acting Assistant United States Trade Representative for Europe and Middle East UZBEKISTAN -- Mr. Narsiddin Nazhimov, First Deputy Minister of Foreign Economic Relations, Investments and Trade BUSINESS AND GOVERNMENT SESSIONS ¶3. (U) The first day of meetings brought together government, business, and NGO representatives in panel sessions focusing on improving Central Asian trade facilitation, government efforts to reduce administrative barriers in trade, and improving logistics and regional trade and transit infrastructure. Trade Facilitation: ¶4. (U) William Veale, Executive Director of the U.S.-Kazakhstan Business Association, chaired the panel on trade facilitation. Veale opened by saying the goal of business is to serve a larger market from a base in the region. He cited the case of FedEx operations in Kazakhstan as an example of the success that can be achieved. Under an arrangement whereby customs questions are dealt with after deliveries are made, FedEx is able to bypass bureaucratic delays for more efficient operations. Ainura Cholponkulova, Executive Director of the American Chamber of Commerce in Kyrgyzstan, followed by talking about the successful conference on Development of Trade, Transportation, and Transit held in Bishkek in April that brought together 150 business and government representatives who adopted an action plan calling for simplification of cross-border transit and establishing a National Council for Trade and Transport that will allow for closer government-business cooperation. Temirbek Shabdanaliev, Executive Director of the Kyrgyz Transporters Association and Kairat Kasymbekov from the Forum of Entrepreneurs of Kazakhstan spoke about a World Bank (WB) project that used a variety of measures to monitor the efficiency of trade and transport performance. In particular, Mr. Shabdanaliev was able to cite, with great specificity, the dollar amount for bribes required to cross many borders. Nevertheless, the study showed a trend towards improved efficiency QNevertheless, the study showed a trend towards improved efficiency in customs operations overall in 2007 as compared with 2006. David Featherstone, USAID Regional Trade Liberalization and Customs Advisor, spoke about the need to improve transparency and access to information, citing the lack of a single comprehensive government trade website in any Central Asian country. Featherstone noted that an independent website covering Central Asian trade issues is under development at www.trade-ca.org. Administrative Trade Barriers: ¶5. (U) The heads of delegations next spoke about government efforts to reduce administrative trade barriers. The Kazakh representative reviewed the deficiencies of Kazakhstan's current border-crossing regime, but he pointed to the law on imports and exports adopted in October 2007, under which he said Kazakhstan has adopted the principal of a "Single-Window" for processing of import and export documents. Kazakhstan has created an inter-agency system for DUSHANBE 00000895 002 OF 005 monitoring cross-border trade, and he noted that Kazakhstan ranked near last in Central Asia in the number of documents needed for processing of imports and exports. ¶6. (U) The representative of Turkmenistan gave a general presentation on his country's current economic situation and plans for future development. The presentation did not address specific administrative trade barriers. The Uzbek representative said Uzbekistan was working to improve its customs procedures and that the situation was improving. His presentation also did not address specific trade barriers. Improving Logistics: ¶7. (U) Hugo Minderhoud, American Chamber of Commerce Uzbekistan, chaired the panel on improving logistics and regional trade and transit infrastructure. He emphasized the need for improved integration across the region. Bahriddin Azamatov, Asian Development Bank, described the work of the Central Asian Regional Economic Cooperation (CAREC) Program. CAREC aims to develop and improve transport corridors, and has six road projects completed or underway. Representatives from the governments of Tajikistan and Kazakhstan then enumerated their countries' spending on road, rail, and airport projects. A Tajik representative noted that the U.S.-built bridge connecting Afghanistan to Tajikistan was an important step in improving North-South trade, but that it had yet to be fully exploited. REGIONAL ELECTRICITY MARKETS ¶8. (U) The government to business panels were followed on the first day by a presentation on the creation of regional electricity markets. Participation in this discussion was limited to government only. George Krol, Deputy Assistant Secretary of State for South and Central Asia, chaired the session on building regional electrical markets. Saying that "market mechanisms can help all of us," he encouraged the building of an electrical link to South Asia to bring economic growth and stability to Afghanistan and western Pakistan. Abdul Wakil from the Afghanistan Infrastructure Rehabilitation Program continued this theme, noting that Afghanistan had to "start over again from point zero" to build an electrical infrastructure. He gave a detailed account of the status of the Afghan North East Power System for electrical generation, transmission, and distribution. ¶9. (U) Khamidulla Shamsiev, Director of the Coordinating Dispatch Center briefly described the Center's role in coordinating electrical transmission throughout the Central Asian region. Chief Dispatcher Umar Karimov stressed the need for transparency and the harmonization of databases maintained by utilities in all Central Asian countries, to bring the collection of data to a level that will allow electrical costs to be computed in Central Asia just as they are in the developed markets of Europe. ¶10. (U) Akram Sulaimanov, Tajik Deputy Minister for Energy and Industry, spoke on the Central Asia South Asia Electricity Transmission and Trade Project (CASA 1000) to build an energy corridor linking Central Asia with Pakistan. He gave a detailed and optimistic account of current implementation status and provided projections of growing power demand through 2020. TIFA COUNCIL MEETING ¶11. (U) The second day of meetings consisted of the Fourth Annual U.S.-Central Asia TIFA Council, attended by government delegations. QU.S.-Central Asia TIFA Council, attended by government delegations. The agenda covered a range of issues, including practical problems of trade, benefits of the Single-Window policy, developments in the Central Asian investment climate, access to information on import/export procedures, and the TIFA Action Plan for 2008-09. ¶12. (U) The TIFA Council meeting was opened by the Tajik Minister of Trade and Economic Development, Mr. Bobozoda. In his opening remarks, Mr. Bobozoda said that for the past several years the TIFA Council had proven an effective, practical instrument to strengthen trade cooperation and improve the investment attractiveness of Central Asian countries. He noted the practical problem presented by the fact that Central Asian capitals were at least 2000 kilometers from the nearest sea ports, but emphasized that Central Asia could serve as a transit route for trade from throughout the Eurasian continent if Central Asian countries removed trade barriers and built trans-national transportation routes. Referring to last winter's energy crisis in Tajikistan and the region, Bobozoda said the crisis had forced Tajikistan to rethink its priorities and give more attention to regional cooperation. DUSHANBE 00000895 003 OF 005 ¶13. (U) Noting that Central Asia was among the world's most energy rich regions, he called for development of stronger trade relations between Central Asian countries. He also noted that Afghanistan was an increasingly important trading partner of Tajikistan, saying that the U.S.-funded bridge at Nizhniy Pyanj would soon become the "transportation artery" of the region. Bobozoda said the GOTI planned to establish a Free Economic Zone near the bridge. ¶14. (U) Mr. Bobozoda said trade and logistics simplification were key factors in private sector development. It was clear, the Minister said, that none of the Central Asian countries could compete individually in the global economy, and he advocated a common economic space in Central Asia. ¶15. (U) AUSTR Mark Mowrey noted that the World Bank gave Central Asian countries low rankings for ease of cross-border trade, and urged adoption of a TIFA action plan for the coming year. The Uzbek representative talked about Central Asia's large resource potential and Uzbekistan's desire to develop better bilateral and multilateral relations. The Afghan representative said his country wanted to reestablish old ties and create new opportunities, and he pointed to Afghanistan's importance as a land bridge between Central and South Asia. 16.(U) The Uzbek representative talked about Central Asia's large resource potential and Uzbekistan's desire to develop better bilateral and multilateral relations. The Afghan representative said his country wanted to reestablish old ties and create new opportunities, and he pointed to Afghanistan's importance as a land bridge between Central and South Asia. Problems of Trade and the Advantages of the "Single-Window": ¶17. (U) Tapio Naula of USAID described the benefits of a "Single-Window" policy which allows parties involved in trade and transport to file the necessary documents at a single entry point in order to fulfill all import, export, and transit-related regulatory requirements. Single-window systems in other countries greatly decreased logistical costs of international trade. Logistical costs in Central Asian countries were among the highest in the world, he said. ¶18. (U) Jonathon Hornbrook of the German Agency for Technical Cooperation (GTZ) spoke on the practical challenges to trade in Central Asia. He provided numerous examples of the difficulties of conducting trade in Central Asia. Nevertheless, he said that there are signs of progress and that "spring is in the air." Hornbrook said that a low World Bank Ease of Doing Business rating (170 out of 180) spurred Kazakhstan to take positive action, including a presidential decree to adopt a single-window approach that in effect will allow for "one-stop shopping." In Kyrgyzstan a presidential decree also has led to a single-window process and improvements in the banking system. ¶19. (U) Larisa Kislyakova from the Tajik Single-Window Working Group said that Group members visited a number of countries to see the system in operation, and would complete work within the month on a proposal for Tajik Government approval. Rustam Akberdin from the Kazakh working group described a program for customs reforms that will include the introduction of a single-window system. ¶20. (U) In the ensuing discussion of administrative barriers and the Q20. (U) In the ensuing discussion of administrative barriers and the single-window approach, the Uzbek representative asked if anyone really knew how much a single-window system cost to operate. Uzbekistan had attempted to implement a system for exports but found the system made exporting more difficult unless simultaneously implemented at all customs posts. Hornbrook replied by repeating detailed cost estimates he had given in his presentation -- for example the estimated 2 million Euros for the system in Kazakhstan -- and he noted that based on the experience in Senegal, the development cost can be recouped in two to three years. Mr. Naula concluded the discussion by saying that Single-Window by itself would not eliminate trade barriers. For this to happen, procedures and regulations had to be modernized first, before implementation of Single-Window. Investment Climate: ¶21. (U) Andrea Dall'Olio of the World Bank's Central Asia regional office discussed developments in the investment climate in the past year. He reviewed the World Bank's Ease of Doing Business report, and pointed out a few generally positive trends in Central Asia, DUSHANBE 00000895 004 OF 005 commending Kazakhstan for using a relatively low ranking as impetus for improvement and noting that Uzbekistan was reforming too. Mr. Dall'Olio posed a rhetorical question: what do businesses want? He answered his question by saying that they want simple and transparent regulations that are cheap and fast. He pointed to a direct correlation between the Ease of Doing Business report and the size of the informal sector, saying the harder it was to be a legitimate business, the more likely a businessman would chose to operate in the grey market, and the size of the informal economy correlated negatively with overall employment. Referring to the problem of corruption, Mr. Dall' Olio said "entrepreneurs cannot distinguish between official and nonofficial payments." He advocated for public administration reforms, specifically raising public sector salaries to combat corruption. ¶22. (U) Following this presentation, representatives from all delegations expounded on the virtues of investing in their countries. Tajikistan touted its hydropower potential, while Kazakhstan, Uzbekistan and Turkmenistan noted their extensive energy reserves and their capability to export them to neighboring countries. No delegation mentioned corruption as a deterrent to investment. Access to Information: ¶23. (U) David Featherstone, USAID funded Regional Trade Liberalization and Customs Project (RTLC) consultant, made a presentation on the issue of access to import and export regulatory information. He spelled out a simple formula - access to information equals trade facilitation equals increased trade activity, equaling increased economic growth. Mr. Featherstone described the key functions of laws and regulations based on the principles of World Customs Organization (WCO) and revised Kyoto Convention. He then showed some practical examples of import/export information operations, including the United Kingdom Revenue and Customs Department and the website of Business link in the United Kingdom. During a brief discussion following the presentation, participants generally agreed that countries' trade information websites needed more up to date information in order to be of use to businesses. However, the Tajik delegation argued that their website was indeed up to date. Discussion of 2007-08 TIFA Action Plan: ¶24. (U) The concluding session was devoted to discussion and adoption of an action plan for 2007-08. Under the U.S.-proposed plan, each country was asked to focus on one or two factors from the World Bank's Ease of Doing Business Report, identify one or two factors from the TIFA discussions on which they will focus attention to facilitate trade, provide quarterly reports on progress towards a single-window system, and identify a working-level contact for TIFA issues. ¶25. (SBU) Kazakhstan proposed deletion of the requirement for quarterly reports on single-window implementation. Uzbekistan seconded that proposal. Tajik Deputy Minister of Economic Development and Trade Larisa Kislyakova defended the need for quarterly reporting, saying that otherwise no one would pay attention to the action plan. All representatives agreed that apart from the issue of quarterly reporting, on the whole the action plan was acceptable as proposed. AUSTR Mowrey asked that all Qrepresentatives submit their proposed changes to USTR in writing by the end of June, with the goal of finalizing the action plan by the end of July. He further suggested that each country work to eliminate one or two trade barriers during the coming year. ¶26. (U) In conclusion, AUSTR Mowrey reiterated that the USG viewed TIFA as a useful tool for improving the trade and investment environment in Central Asia. Although there were problems, there were also signs of progress and hope. Private sector involvement continued to be critical. AUSTR Mowrey announced that USTR would be happy to host next year's TIFA Council in Washington, D.C. ¶27. (U) The TIFA council received favorable and extensive press coverage in Russian language newspapers in Tajikistan. Mr. Shabdanaliev's presentation from Kyrgyzstan received the most coverage, perhaps because his presentation clearly outlined the customs and transportation issues in Central Asia, based on surveys and analysis. COMMENT ¶28. (SBU) Positive elements of this year's TIFA sessions included DUSHANBE 00000895 005 OF 005 strong participation by the private sector and the Afghan observers, and the formal establishment of an American Chamber of Commerce in Tajikistan on the eve of the TIFA meetings. Negative elements included the failure of Kyrgyzstan to send a delegation from Capitol (their Ambassador in Dushanbe attended, but did not participate), and the failure of delegations to engage on issues of investment climate and trade facilitation. At times delegations flatly denied assertions made by private sector and NGO participants, for example, on the absence of up-to-date customs websites. The discussion sessions were notable for the absence of discussion. This and the opposition of Uzbekistan and Kazakhstan to quarterly reports on progress on the TIFA Action Plan called into question their commitment to the changes and reforms TIFA envisions. ¶29. (U) USTR and Commerce Department have cleared this cable. JACOBSON