IMPLEMENTATION OF RECONSTRUCTION OPPORTUNITY ZONES REQUIRES

UNCLAS SECTION 01 OF 03 ISLAMABAD 000036

SIPDIS

SIPDIS
SENSITIVE BUT UNCLASSIFIED

DEPT ALSO FOR USAID, OPIC
DEPT PLEASE PASS USTR, USTDA

E.O. 12958: N/A
TAGS: ECON PGOV PK ETRD EAID PREL AF
SUBJECT: IMPLEMENTATION OF RECONSTRUCTION OPPORTUNITY ZONES REQUIRES
IMMEDIATE COORDINATED INTER-AGENCY ACTION


1. (SBU) SUMMARY: Reconstruction Opportunity Zones (ROZs) will be an
important tool for economic development in Afghanistan and the
border areas of Pakistan. Embassy Islamabad has developed a
description of initiatives which will be essential for the
implementation of the ROZs. Many, such as improved labor standards
in Pakistan and customs enforcement, will also be legally required
if the legislation is approved as drafted. Similarly, the
redrafting of the Afghan transit treaty will be necessary for the
ROZs to be a success. Embassy Islamabad and Embassy Kabul request
that greater interagency coordination and planning commence to
prevent delays in implementation. Embassy Islamabad requests TDY
assistance in the trade field from USDOC and USDOL to engage in an
extended dialogue with the government on implementation of the ROZs
and the transit trade issues.


2. (SBU) Embassy Islamabad has sent a chart via unclassified email
suggesting supporting initiatives for the ROZs to principals and
staff in Washington agencies. These supporting initiatives include
1) Customs enforcement and harmonization; 2)Transit trade, including
assistance from technical experts; 3) Investment incentives
including political risk insurance; 4) Labor, including technical
experts to assist with increased compliance and inspections; 5)
Financing, including incentives for small and medium enterprises;
6) Infrastructure upgrades at existing industrial parks;
7)Vocational training and Institutional development; 8) Market
outreach and trade promotion and 9) Agriculture, including technical
experts for women's empowerment and best agricultural practices.


3. (SBU) Implementation of the ROZs will be critical in the FATA
strategy. As instructed by Principals on December 28, this cable
outlines proposals to enhance and expedite development projects for
Pakistan's FATA and adjacent Pakistan-Afghanistan border areas. END
SUMMARY.

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ACTION NEEDED BY WASHINGTON AGENCIES
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4. (SBU) Afghanistan and the border regions of Pakistan are critical
fronts in the struggle against violent extremism. These areas hold
few options for legitimate employment, and the resulting poverty and
hopelessness are exploited by terrorists and drug traffickers. The
governments of Afghanistan and Pakistan have pledged sustained
commitment in the global war on terrorism, and for this effort to be
successful we must eliminate the conditions in which violence and
lawlessness thrive. The Administration is advancing a three-pronged
strategy to counter extremism that leverages political, military,
and economic tools. Reconstruction Opportunity Zones (ROZs),which
the President first announced in March 2006 in Pakistan, are a
critical part of the economic component of the USG strategy and
offer a vital opportunity to improve livelihoods, promote good
governance and extend and strengthen the hands of the Afghan and
Pakistani governments.


5. (SBU) In anticipation that legislation to enact the
Reconstruction Opportunity Zones will soon be introduced in the U.S
Congress, Embassy Islamabad has compiled information on some
supporting initiatives that are essential to ensure success of this
critical economic tool. The ROZs are an integral part of the
strategy for the global war on terror in Afghanistan and Pakistan.
It is critical to begin planning the implementation phase of the
ROZs now so that the governments of Pakistan and Afghanistan as well
as potential investors can readily avail themselves of the
opportunities in the ROZs. Action is needed in the short term in
order to respond to on the ground realities which necessitate
economic development quickly.

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COORDINATING SUPPORTING INITIATIVES ESSENTIAL FOR IMPLEMENTATION
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4. (SBU) Colleagues are requested to enact speedy inter-agency
coordination and draw on developed expertise and best practices for
swift implementation. The nine suggested supporting initiatives for
the ROZs include (in no particular order as each will be essential):


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5. (SBU) Customs Enforcement and Harmonization. Recommendations
include capacity building, cross border coordination, measures to
combat illegal transshipment, modernization and harmonization of the
customs for Pakistan and Afghanistan.


6. (SBU) Transit Trade. Recommendations include USG support to
update the bilateral 1965 Afghan Transit Trade Treaty which governs
the movement of goods between Afghanistan and Pakistan. TDY experts
are requested to coordinate and develop a mutually acceptable
working draft.


7. (SBU) Labor. Recommendations include improvements in labor
inspections, labor standards, and best practices for companies on
both sides of the border. TDY technical experts are requested to
assist in training and reestablishing labor inspections.


8. (SBU) Investment Incentives. Recommendations include working with
the Governments of Afghanistan and Pakistan to develop their
internal incentives to lure investment to the targeted ROZ
locations.


9. (SBU) Financing. Recommendations include development of creative
financial incentives and structures which will allow multinational
corporations and smaller local business to operate in these
difficult areas.


10. (SBU) Infrastructure Upgrades. Existing industrial parks in
Afghanistan and in the border areas of Pakistan will make ideal
locations to designate as the initial ROZ sights, however some
infrastructure upgrades will be necessary to meet safety codes and
ensure attractiveness to international companies.


11. (SBU) Training and Institutional Development. Vocational and
skills training targeted specifically to the product sectors which
will receive duty free preferences has the potential to transform
the region by employing the scores of youth seeking a positive
focus.


12. (SBU) Market Outreach and Trade Promotion. Duty free
preferences are not successful if not included as part of a
coordinated plan to help move goods to awaiting markets. Capacity
building for local producers and buyers will open doors and connect
these isolated regions to the world economy.


13. (SBU) Agriculture and Forestry. Recommendations include capacity
building for agricultural development of best practices, improved
production, safety standards and livelihood empowerment of women and
youth. TDY technical experts are requested to assist in assessing
the current agricultural situations and determining areas where USG
assistance would be most effective in the ROZs.


14. (SBU) Embassy Islamabad would also request that the SCA bureau
lead the efforts for outreach to the Afghan and Pakistani Embassies
in Washington. Close coordination with Afghan and Pakistani
counterparts in Washington will be essential not only for
Congressional approval but also for reinforcing the implementation
coordination taking place with Ministries in Islamabad and Kabul.


15. (SBU) This message and the supporting initiatives chart has been
coordinated with Embassy Kabul. The supporting initiatives chart
has been sent via unclassified email to the following people in
Washington:

For the Department of State: Richard Boucher; Caitlin Hayden; Don
Camp; Allysa Aries; John Fox; Edward Wittenstein; Daniel Sullivan;
Bill Craft; Christian DeAngelis; Colin Guest; Edwin Sagurton; Alfred
Anzaldua; Mark Mittlehauser; Leo Gallagher; Jack Spillsbury; Neil
Kromash; Shamila Chaudhary; Michael O'Malley; Richard Sacks; Rozina
Damanwala

For USTR: Claudio Lillenfeld; Scott Quesenberry, Lewis Karesh, James
Murphy; Aaron Rosenberg

For Commerce: Susan Hamrock, Awinash Bawle


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For Treasury: Stephaine Segal, Gordona Earp, Timothy Skud, Andrew
Bauckol,

For OPIC: Dolce Zahnister, Kevin Callahan

For US Agriculture: Mark Keenum, Ellen Terpstra, Michael Yost,
Constance Jackson, Kirk Miller, Pat Sheikh, Chuck Alexander, Frank
Lee, Ross Kreamer, James Dever

For AID: Mark Ward, Lisa Chiles, Kay Freeman, Nitin Madhav, James
Walker, William Butterfield,

For NSC: Elizabeth Millard, Patricia Mahoney, John Herrmann,

For Labor: Charlotte M. Ponticelli, Lawrence W. Casey, Rachel
Rigby,

For Department of Homeland Security: Marisa Lino, Karen Marmaud,
Michael Feinberg, Jamie Zuieback, Mark Mullen, Luke Bellocchi, Janet
Labuda, Brian Fennessy


PATTERSON