GOVERNMENT WORKS TO CRUSH FEW BRIGHT SPOTS IN ECONOMY

UNCLAS SECTION 01 OF 02 DUSHANBE 000230 SENSITIVE SIPDIS DEPARTMENT FOR SCA/CEN E.O. 12958: N/A TAGS: ECON ECPS PGOV ELTN TI SUBJECT: GOVERNMENT WORKS TO CRUSH FEW BRIGHT SPOTS IN ECONOMY DUSHANBE 00000230 001.2 OF 002 ¶1. (SBU) Summary: The poorest of the former Soviet republics, Tajikistan's development indicators wallow near the bottom of international rankings. Its agriculture is antediluvian; its infrastructure is inadequate; its heavy industry is heavily subsidized. There are nevertheless a few precious sectors of the economy that have bucked the trend, showing signs of responsiveness and ingenuity benefitting both businesses and consumers alike. Among these are mobile telecommunications, where Tajikistan has been a regional leader, and transport, where cheap and efficient private minibuses complement Dushanbe's dilapidated city transport structure. In past weeks, however, the government has deliberately sought to dismantle the achievements in both of these sectors, under the patently ridiculous claim of improving service. The phenomenon is unfortunately a familiar one here: government officials view successful businesses as sources of personal enrichment. While the latest government efforts to colonize successful business sectors are deeply unpopular, Tajiks appear resigned to the situation. End summary. ¶2. (SBU) The Tajik economy is in many ways undeveloped, or even backward. As much as half of the country's meager domestic energy production is diverted to a Soviet-built aluminum smelter which, thousands of mountainous miles away from both inputs and markets, exists only because it pays next to nothing for the government-subsidized power it consumes. While the plant's profits flow offshore to undisclosed accounts reputedly operated by high-level government officials, the country's population shivers through the winter with little or no electricity. Tajikistan's second major export, raw cotton, is produced on the backs of farmers and students who receive little or nothing for their labor while cotton financers use dodgy loans from government accounts to guarantee a profit on "their" investment. Meanwhile, the country's infrastructure receives scant attention: the road connecting Tajikistan's two main regions, still a tortuous mountain track in many places, is only being rebuilt because the Chinese government is footing the bill. Mobile Phone System One of Few "Golden Eggs" in Tajik Economy~ ¶3. (SBU) Despite the overall dismal picture, there are a few areas of Tajikistan's economy that genuinely work. Two of these are mobile telecommunications and public transport. Unlike many of its neighbors, Tajikistan's mobile communications sector is responsive, efficient, and reasonably priced. When other countries in the region put strict limits on mobile providers, including extremely expensive operating licenses, the Tajik government opened its market to a multitude of providers, who could enter relatively cheaply and without burdensome regulation. As a result, the country currently has ten operators, compared to just half that number in the far larger neighboring countries of Uzbekistan and Kazakhstan. The competition has generally kept prices low and services competitive. As a result, this country of 6 to 7 million people has nearly 3.5 million mobile phones, and vast areas that never had a reliable link to the outside world now receive wireless signals. ...So Government Decides to Eat Goose ¶4. (SBU) Last week a government bill emerged, with no publicity, calling for the establishment of a government-controlled "single switching center" through which all international mobile communications would have to be routed. The bill offers scant justification for the new center, employing only vague language about "defending the security of information space" and "protecting socio-economic activity." According to Gafur Irkaev, the head of the Association of Mobile Operators of Tajikistan the bill is in fact little more than a power grab by state-owned Tajik Telecom, which is looking to become a communications monopoly. Although he suspected that President Rahmon himself is not part of this contingent, he said they may already have the President's ear, judging by a speech he delivered in January, where he excoriated the country's cellular operators for getting rich while Tajikistan's energy projects are desperate for funding. ¶5. (SBU) According to Irkaev, the government bill is doubly disingenuous. First, it violates existing legislation "forbidding unions of legal entities and governments with the aim of monopolizing the production or sale of goods, giving the current government authority that may have the effect of restricting competition..." Second, the government already had all of the tools it needed to investigate any concerns about DUSHANBE 00000230 002.2 OF 002 unauthorized use of the mobile phone network, whether for terrorism or any other purposes. The mobile phone companies maintain lists of subscribers, including all incoming and outgoing traffic, which the government has the right to peruse upon request. Irkaev asserted that a government-run center would actually worsen the situation, since its records maintenance was likely to be far worse than that of the existing private operators. ¶6. (SBU) According to Irkaev's deputy Ulugbek Zoirov, the fact that the government does not have a legal or rational leg to stand on explains why the bill was assembled in secrecy, without consulting the organizations it would regulate. Nearly three years ago a similar proposal was mooted, only then the idea was shopped around to various companies and other experts for their opinions. The government ultimately sought the advice of the World Bank, which responded that a single switching center was a bad idea, and the proposal was dropped. This time the Association of Mobile Operators of Tajikistan only caught wind of the bill by accident. This has fueled the theory that the new legislation is simply a thinly-concealed effort by Tajik Telecom to monopolize the market. Transport System Ain't Broke... ¶7. (U) Dushanbe's city-run transportation system, while it runs reasonably well in the center of town, is generally inadequate in outlying areas. City buses operate on only a few major routes, and the vans that service residential areas are cramped, doddering, and infrequent. Beginning two years ago the situation began to improve, however, when Chinese-made minivans known informally as "Tangems" began plying the city's transport routes. The Tangems, which are slightly more expensive than the city-run transport (about 26 U.S. cents vs. 16 U.S. cents),have markedly improved Dushanbe's transportation situation. Although somewhat cramped, the 7-passenger Tangems nevertheless provide fixed seating for their passengers, unlike the city vans, which will squeeze passengers on top of one another in order to maximize riders. Most importantly, the Tangems go everywhere in the city, even altering their routes if passengers request. ...But Government Still Wants to "Fix" It. ¶8. (SBU) Despite the obvious advantages the Tangems bring to Dushanbe, the city government has been steadily chipping away at them. First, Tangems were prohibited along the city's central street at the end of 2007. Then, earlier this month, Tangems were also outlawed on Somoni Avenue, the main thoroughfare linking central Dushanbe with most of the city's residential districts. The government provided very little explanation for the new rules, noting only that it sought to "raise the quality of passenger service on public transport." There are reports, however, that Dushanbe Mayor Ubaidullaev has contracted with Russian companies to buy 150 buses for $4 million that will operate on Somoni and Rudaki Streets. City bus services reportedly bring in $500,000 a month; it is commonly assumed that the Mayor's office sees a profit from the operations. ¶9. (U) As a result of the prohibition, the commute for many city residents has again become complicated. The city's roughly 5,500 Tangem drivers have been scrambling to put together new routes that do not take them through the prohibited areas. Those who do try to challenge the new ordinance are pulled over and harassed by the city's omnipresent and fabulously corrupt traffic police. As one driver put it, "Please explain to me the logic of this decision. We are in the middle of a financial crisis, and the government's response is to take jobs away from its citizens by 'fixing' something that isn't broken." ¶10. (SBU) Comment: Officials looking for quick profits appear not to understand, or care, that they are destroying stable, long-term sources of revenue. Tangem operators bring in hundreds of thousands of dollars in annual revenue in customs duties and registration fees; mobile phone companies pay even more in taxes and fees for access to the national telephone grid. Since it has so far provided very little explanation for its actions, it is not clear whether the government's recent moves are deliberately predatory or merely foolish. End comment. JACOBSON