AFGHANISTAN: AMBASSADOR WOOD'S MEETING WITH THE AFGHAN

UNCLAS SECTION 01 OF 02 KABUL 003088 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 USOECD FOR ENERGY ATTACHE CENTCOM FOR CSTC-A NSC FOR JWOOD TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, AND MNUGENT OSD FOR SHIVERS COMMERCE FOR DEES, CHOPPIN, AND FONOVICH SENSITIVE SIPDIS E.O. 12958 N/A TAGS: EIND AF SUBJECT: AFGHANISTAN: AMBASSADOR WOOD'S MEETING WITH THE AFGHAN CHAMBER OF COMMERCE AND INDUSTRIES ¶1. (U) Summary: Ambassador Wood met November 23 with leaders of the Afghan Chamber of Commerce and Industries (ACCI) for the first time since its reorganization. He underscored the central role Afghanistan's private sector must play in long-term, sustainable development and urged ACCI to become a unified voice for Afghan business. While noting progress and the supportive role of the U.S., both sides agreed that much work remains ahead, particularly in energy, finance, anti-corruption, taxation, and commercial and financial law. ACCI members complained about their treatment by the GIRoA and criticized the international community for insufficient consultation with Afghans on foreign assistance. They also requested the Embassy's help in obtaining business visas and greater access to foreign contracts for Afghan business. End summary. ¶2. (U) On 11/23/08, Ambassador Wood met for the first time since their election with the Board of Directors of the reconstituted Afghan Chamber of Commerce and Industries (ACCI) at the request of Mahmood Karzai, ACCI vice-chair and younger brother of President Hamid Karzai. The new ACCI is the result of the recent merger between the Afghanistan International Chamber of Commerce and the former ACCI, which had been headed by Mahmood Karzai and Kabul Bank chief Sherkhan Farnood. The first election of the Board of Directors of the merged chamber took place last summer, electing 21 members by region and Farnood and Karzai again to positions of leadership, as chairman and first vice-chairman, respectively. ¶3. (U) In an exchange of views with the entire board, Ambassador Wood emphasized that the private sector, not the international community, will ultimately assure long-term economic growth and development in Afghanistan. Effective anti-corruption measures, affordable credit, reasonable taxes and fees, and good dispute settlement mechanisms, are key elements to a business-friendly environment, he said. The ACCI must lobby hard for greater transparency and predictability to attract greater foreign investment. The pending commercial and financial laws are crucial underpinnings to private sector development, and he urged the ACCI to help make their rapid enactment a priority. He pledged the Embassy's continued advocacy efforts with Parliament and the administration regarding these laws. ¶4. (U) Ambassador Wood noted the many positive signs of democracy and a revitalizing economy he had seen across the country: working street lights and bustling traffic in Kabul; prosperous rice farms in Kunduz; a women's shura in Badakhshan. He cited the billions of dollars the U.S. has contributed so far to Afghan reconstruction and expressed optimism in particular about impending improvements in the energy sector. The third turbine recently delivered to the Kajaki hydropower plant and additional supplements over the next 12 months promise to provide an additional 50 megawats of power to the southern region and decrease reliance on inefficient and expensive diesel-powered generators. ¶5. (U) Board members acknowledged the key role the U.S. has played in progress to date but stressed the continuing drag that insecurity, corruption, high taxes, poor access to credit, and, in particular, power shortages place on the private sector. They complained of the bureaucratic complexity of registering a business in Afghanistan and pointedly criticized the Afghan government for what they called a Soviet-style distrust of the private sector and desire to control the economy from above. (Note: Last month USAID launched a Central Business Registry reform, which consolidates 5-6 stops into one at the Ministry of Commerce for registering a business.) ¶6. (U) The Chamber's CEO, a non-elected executive, complained at KABUL 00003088 002 OF 002 length about the government's lack of "respect" for the ACCI and asked for the Embassy's intercession in an ongoing property dispute between the GoIRA and the ACCI dating from the time when ACCI was a quasi-governmental entity. He also complained about a lack of coordination among international donors and argued that some of their aid was ineffective because Afghans had not been consulted beforehand, and he offered ACCI's help to head off such problems in the future. He and other Board members asked for the Embassy's help in gaining greater access to foreign contracts, both for income generation and capacity building. In addition, they asked for the Embassy's help in obtaining visas for Afghan businessmen. To applause, the Ambassador reported that the Embassy would begin accepting business visa applications in February. ¶7. (U) In closing, the Ambassador noted that despite the very real obstacles facing Afghan business, for the first time in Afghan history the free market is enshrined in the constitution, a remarkable and lasting achievement. Greater cooperation with regional partners, Pakistan in particular, remains a key goal, and all should be encouraged by Pakistan's growing acknowledgment of the importance of a safe and open passage between Jalalabad and Peshawar. If Pakistan and Afghanistan continue to cooperate economically, they can realize their potential to be the gateway between South and Central Asia. Finally, Ambassador Wood urged the ACCI to seize the opportunity provided by their merger to become a strong and united voice for Afghan business. They must work every day to make their voice heard and to prove their voice is worth listening to by being serious and law-abiding corporate citizens. They need to lobby the government and parliament for their common interests and find an advocate within the government who will take their part without trying to make business decisions. ¶8. (SBU) Comment: ACCI talks a good game, but has shown few signs so far of moving beyond the narrow interests of its leadership. The Embassy has continued to urge the ACCI to lobby for market-oriented reforms, in particular the passage of pending financial and commercial laws key to private sector development. While there has been progress on some of these laws -- most recently the Mortgage Law, passed by the lower house of the National Assembly on November 15 - ACCI has not to our knowledge played an active role. For the moment, ACCI appears less interested in what it can do for Afghanistan than in what the government and donors can do for it. The Embassy, including USAID, will continue to work with ACCI and prod it toward greater professionalism. Progress, however, is likely to be incremental, and the ACCI, sadly, provides a fairly good mirror of local attitudes with respect to private initiative. DELL