KUNDUZ PROVINCE: INCREASED TRADE AND IMPROVED SECURITY

UNCLAS SECTION 01 OF 02 KABUL 001602 DEPARTMENT FOR SCA/FO, SCA/A, EUR/RPM NSC FOR WOOD OSD FOR WILKES CENTCOM FOR CG CSTC-A, CG CJTF-101 POLAD SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PREL PGOV ECON ETRD AF TI SUBJECT: KUNDUZ PROVINCE: INCREASED TRADE AND IMPROVED SECURITY DRIVE ECONOMIC GROWTH REF: Kabul 841 ¶1. (SBU) Summary: Private sector activity, spurred by trade across the new Afghan-Tajik bridge, and improved security are driving economic growth in Kunduz. Security has benefited from improved Afghan army and police capabilities, institutionalized co-operation amongst the security forces and a temporarily reinforced Provincial Reconstruction Team (PRT). However, limited governance capacity, a lack of reliable energy, and inconsistent application of the rule of law prevent greater growth. It is important that the stabilizing reserve force and army and police mentoring functions remain. Afghan-Tajik Bridge Brings Economic Growth -------------- ¶2. (U) Kunduz has benefited from the seven-fold increase in traffic across the Afghan-Tajik bridge. Multiple gas stations and hotels have sprung up throughout the city to cater to increased vehicle traffic. Kunduz's central business district has grown with new business improvement projects. The city hosted an agriculture fair June 19-21 that included a delegation of 50 Tajik businesspeople. The successful and secure event underlined the region's potential for trade and the Afghan government's ability to provide security for an event that approximately 20,000 people attended. ¶3. (U) Nowhere is the growth and dynamism more palpable than at the border city of Sher Khan Bandar. The European Commission will complete the construction and re-location of the Commercial Customs facility from Kunduz to Sher Khan Bandar by the end of 2008. An Afghan private investor has committed to investing USD 1.5-5 million for a 1600-shop bazaar in a public-private partnership. Finally, the Chinese government announced in May 2008 its plans for a USD 3 billion rail-line from Sher Khan Bandar as part of the Aynak Copper Mine project. Afghanistan-Tajikistan Cooperation -------------- ¶4. (U) In January 2008, Afghanistan and Tajikistan reached an agreement to facilitate the issuance of vehicle road passes for the two countries. In March, the two countries announced an inter-state bus service from Kunduz to Dushanbe. Discussions are on-going for the establishment of a Tajikistani consulate in the province. An energy agreement is currently in place, but Tajikistan's irregular winter production led to a three-month hiatus in electricity exports to Kunduz. Kunduz currently has no large-scale independent electric generation capacity. Security Improvements -------------- ¶5. (SBU) The U.S. and German militaries provide continual mentoring and training to the Afghan National Army (ANA) and Afghan National Police (ANP). The Focused District Development (FDD) program included Chaha Dara district's ANP in the first round of training and in July, Emam Sahib is slated to be trained as part of FDD Cycle ¶4. The ANA will field a new brigade in Kunduz in 2009. Improved ANA and ANP capabilities, as well as their ability to operate with one another, are evident in the joint and Afghan-only operations conducted in the province. Finally, the temporary reinforcement of the PRT with a 200-person German airborne company allowed the PRT to regain the initiative against insurgent attacks (reftel). Governance: Lacking Planning and Project Management Expertise -------------- ¶6. (U) Kunduz's provincial government continues to garner credibility and legitimacy while delivering services to the population. However, it continues to be limited in its planning and project management capabilities. The provincial government does not have a master plan for development of Sher Khan Bandar, for example, and a disagreement between Customs and the Afghan Border Police on the operation of the border-crossing point has been submitted to Kabul for resolution after the two parties were unable to agree on a plan locally. The business community also suffers from the government's lack of understanding for the private sector and irregular application of governmental regulations. Kunduz's recently arrived prosecutor has already made inroads in cleaning up administrative corruption. Reconstruction and Development -------------- KABUL 00001602 002 OF 002 ¶7. (SBU) Reconstruction activity remains civilian-led; the largest donors are the German Ministry for Economic Co-operation and Development and USAID. Afghan and international governmental and non-governmental organizations are active throughout the province. German development workers live and work in Kunduz city separate from the PRT. The U.S.-funded Keshem-Feyzabad road in Badakhshan province will link Badakhshan's capital, Feyzabad, with Kabul via a paved road through Kunduz. ¶8. (U) In Kunduz, economic development and growth is occurring thanks to the investments that the international community has made in roads and bridges. If the energy piece can be solved, Kunduz will be well on its way to sustained economic growth. WOOD