THIRD RECCA SOLDIFIES GAINS, CONFIRMS SUPPORT FOR REGIONAL COOPERATION

UNCLAS SECTION 01 OF 06 ISLAMABAD 001218



SENSITIVE

SIPDIS



E.O. 12958: N/A

TAGS: ECON, EFIN, ENRG, ERTD, EAID, PHUM, PK

SUBJ: THIRD RECCA SOLDIFIES GAINS, CONFIRMS SUPPORT FOR REGIONAL

COOPERATION



1. (SBU) Summary: At the third Regional Economic Cooperation

Conference on Afghanistan (RECCA) May 13-14 in Islamabad, 39

countries and international organizations discussed expansion of

regional cooperation and coordination in support of Afghanistan.

Working groups on health, labor, energy and infrastructure, mining,

and transit trade were for the most part successful in focusing

discussion on concrete projects and activities. The Conference

served as venue for the initial negotiations between Afghanistan and

Pakistan on updating their Transit Trade Agreement, with many

Conference participants offering assistance, if needed. It also

served to demonstrate progress on the reach of railheads into

Afghanistan and to reconfirm commitments and progress on electricity

cooperation centered on Afghanistan. A parallel business event

provided targeted networking opportunities for Afghan and Pakistani

(and a smattering of foreign) companies. Simply holding the event

successfully after a more than two year delay, was an achievement.

Turkey volunteered to host the next RECCA. End Summary.



Security and Atmospherics

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2. (U) Delegations from 39 countries and international organizations

met in Islamabad May 13-14 for the third Regional Economic

Cooperation Conference on Afghanistan (RECCA). The U.S. delegation

was led by Principal DAS for South and Central Asia Pat Moon. Prime

Minister Yousef Raza Gilani represented Pakistan, while Afghan

President Hamid Karzai led a large, ministerial-level delegation

from Kabul.



3. (SBU) Logistics became chaotic when the opening session was moved

for security reasons from Jinnah Conference Center to the Prime

Minister's Secretariat just minutes before the conference was due to

open. Adding to the morning's confusion, Karzai returned to Kabul

soon after the opening session, taking most of the Afghan ministers

with him and leaving a more junior delegation of one Minister and a

group of senior officials and exasperating the Pakistanis. Despite

these glitches, however, the overall tenor of the gathering was

positive.



4. (SBU) Karzai, Gilani other ministers and heads of delegation all

called for increased cooperation as a main contributor to stability

and growth in region. Although this was not a pledging event, most

delegations could not resist detailing their assistance to date to

Afghanistan. U.S., EU, and United Nations Assistance Mission to

Afghanistan (UNAMA) efforts to develop a more specific agenda

contributed to slightly more concrete outcomes than in the two

preceding RECCAs, in New Delhi and Kabul. Working groups on health,

labor, energy and infrastructure, mining, and transit trade were for

the most part successful in focusing discussion on specific projects



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and activities. A parallel business event provided targeted

networking opportunities for Afghan and Pakistani (and a smattering

of local reps of foreign) companies.



5. (SBU) Delegations welcomed Turkey's offer to host the next RECCA

and an EU offer to support a center in the Afghan Ministry of

Foreign Affairs to follow up on regional cooperation. The final

declaration also noted several other tangible outcomes, including:

the Asian Development Bank (ADB)'s commitment to extend the railroad

line from Hayraton, Afghanistan, to Mazar-e-Sharif and the European

Commission's willingness to fund a broader Afghan Railroad

pre-feasibility study; a shared desire to accelerate work on the

electricity corridor (CASA 1000 from Kyrgyzstan and Tajikistan to

Afghanistan and Pakistan) and the

Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline;

establishment of a customs academy in Kabul; and support for the

establishment of joint Chambers of Commerce.



Working Groups

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6. (SBU) On health, working group members agreed on four areas of

cooperation: short-term transfers of patients to countries such as

Turkey for urgent medical attention; using telemedicine technology

to treat patients in remote areas; cross-border facilitation of

health professionals, such as psychiatrists, gynecologists, and

anesthesiologists; and increased training for professionals in the

health sector. The Canadians stressed the importance of a more

well-coordinated campaign to eradicate polio; all parties agreed

that international donors should ensure funding sufficient to

complete cross-border vaccinations ($135 million for Pakistan, $25

million in Afghanistan).



7. (U) The labor working group focused on an ILO/Afghanistan report

that called for (among other things) international efforts to

upgrade vocational training facilities and resources. The working

group also recommended that the ILO assist with a labor survey in

Afghanistan and among Afghan refugees in Iran and Pakistan to assess

the types of skilled labor that exist among potential returnees.

Finally, the working group took note of the need to reduce reliance

on informal mechanisms to send remittances, calling for a "regulated

and incentive-based" initiative to encourage Afghans abroad to use

it. Participants acknowledged that Afghanistan's capacity building

needs are much greater than migrant labor and returning refugees can

meet, and suggested the export of unskilled labor from Afghanistan

as a poverty alleviation strategy.



8. (U) The Mining Working Group focused on human capacity and legal

framework issues. Representatives from the World Bank, and the



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Italian, French, and Turkish Embassies joined USDEL in urging a

review of regulations implementing Afghanistan's mining law to

ensure that private sector views be incorporated into the draft.

The Afghan Deputy Minister of Mines maintained that the law could

not be changed and instead stressed Afghanistan's desire for human

capacity development projects. USDEL reiterated that without a

commercially-viable mining sector, particularly marble, such

projects would do nothing to increase responsible exploitation of

Afghanistan's mineral wealth.



9. (U) The working group recommended that the Afghanistan Ministry

of Mines consult with all relevant stakeholders in framing mining

regulations based on the Mining Law to facilitate investment in the

mineral sector. Further, training programs to develop professional

manpower in geo-scientific disciplines in Afghanistan should be

developed and the technical capacity of Gems and Gemology Centre in

Peshawar should be enhanced in accordance with the goals of the

Turkey-Afghanistan-Pakistan "Ankara Process." Also within the

Ankara Process, feasibility studies in the fields of coal mining,

marble extraction and finishing will be conducted and a "Tripartite

Project Unit" will be established by the Turkish International

Cooperation and Development Agency (TIKA) to include development

experts from three countries. Finally, Italy will consider

supporting the marble and granite sectors in Afghanistan in

coordination with similar assistance being provided to Pakistan.



10. (SBU) The Energy and Infrastructure group reviewed plans for

energy development between Afghanistan and its neighbors,

Afghanistan's desire to establish a railroad network, and regional

water management. On railroads, Iran noted the progress on

extending its Railroad to Herat. ADB discussed its commitment to

complete feasibility studies on a rail connection from Herat to

Hayraton (Uzbek border) and Ishkan Bandar (on the Tajik border).

The Bank representative confirmed it would fast track funding to

construct the extension of the Uzbek rail line in Afghanistan beyond

Hayraton to Mazar-e-Sharif, and hoped for completion in 14 months.

The European Commission indicated its willingness to complete a

pre-feasibility study for Afghan rail, possibly following the ring

road. One focus of such a study would be the Afghanistan-Pakistan

priorities of extending their rail head from Chaman to Kandahar and

Torkham to Jalalabad. The Afghans clarified that their commitment

with Iran and Tajikistan to a rail interconnection was "only

political," adding that, while the Chinese were obliged to build a

railroad to carry the output from its Aynak Copper concession, there

was as yet no specific project.



11. (SBU) On energy, Afghanistan presented progress on its Northeast

power system, noting that the first electricity imports to Kabul



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from Uzbekistan that began in January 2009 had changed everyone's

perspectives on electricity. These imports would soon increase

significantly, now that the entire transmission line to Kabul is

becoming operational. The Afghans reconfirmed their commitment to

the larger regional project for electricity trade from Central Asia

to Afghanistan and Pakistan (CASA),consistent with the joint

statement agreed with the World Bank in early May in Washington.

Pakistan also reiterated its interest in moving forward to purchase

electricity from this project and Tajikistan confirmed its

continuing commitment. The fourth project partner, Kyrgyzstan, did

not participate in the working group. ADB expressed concern that

the electricity project would not be viable until new power

generation was developed in Central Asia, and that in their dialogue

on funding priorities the partner countries were not making this

project a priority. The Afghans agreed that there was a political

commitment but had many claims on any available funding, adding that

bringing other energy suppliers into the mix could help. Despite

Uzbek and ADB reservations, the working group recommended

accelerating progress on this project.



12. (SBU) The Afghans and the ADB also briefed on the status of the

Turkmenistan-Afghanistan-Pakistan-India or TAPI pipeline, with the

ADB noting that it had not seen "any progress": although there are

numerous bilateral contacts, the partners have not completed the set

of proposed legal agreements to frame the project. The ADB reported

that Turkmenistan, whose delegation did not attend the working group

session, has recently completed a required audit of reserves by

Gaffney Kline, although audit results have not yet been distributed.

Pakistan added that Turkmenistan indicated it cannot move ahead

because there has been no resolution of questions related to

security in Afghanistan and Pakistan along the projected route.

Furthermore, Pakistan noted that the project cost is now estimated

to be $8 billion and, particularly in this economic climate, it will

be difficult to attract either private sector partners or sufficient

debt financing.



13. (SBU) In a brief review of water management, Pakistan pressed

Afghanistan to enter into discussion with its neighbors on its

trans-boundary water rights. The Afghans reiterated their lack of

both the necessary data on water resources and the expertise to

engage on trans-boundary water issues. The Afghan representative

said that Afghanistan is now actively talking to a select group of

donors on developing the necessary capacity.



14. (SBU) Uzbekistan indicated to the working group that as a matter

of law it supported the rights of all riparian states to give

priority to the ecological and social impact of any hydro resource

development on trans-boundary waters, and suggested particular



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caution in moving ahead with any project of that type (Note: the

Uzbeks pushed for similar language to be included in the meeting

final declaration. A more general clause noting rights in

accordance with international law was eventually inserted. End

Note). The Tajik delegation spoke on the margins to SCA PDAS Pat

Moon, stressing Tajikistan's desire to pursue the CASA project and

requesting continued USG support for the electricity corridor

project. Tajikistan also sought U.S. support for their right to

proceed with new hydro generation plants in the face of Uzbek claims

and pressure.



15. (SBU) The transit trade working group resulted in positive steps

toward greater regional integration despite some heated discussions

between the Afghan and Pakistan delegations. Both sides

reiterated the parties' commitment to renegotiate the

Afghanistan-Pakistan Transit Trade Agreement by December 31, 2009,

and to resolve issues bilaterally in the interim. The Pakistani

government agreed to include language on regional promotion of

exports for Afghan fresh fruit and vegetables. The exchanges were

at times confrontational, with the Afghans raising familiar

complaints about non-tariff barriers blocking trade and the

Pakistanis raising familiar complaints about sanitary and

phyto-sanitary issues. The working group agreed to recommend

arriving at a consensus draft of the Bilateral Customs Agreement

between Afghanistan and Pakistan using the World Customs

Organization template by June 30, and to sign the agreement itself

not later than March 2010 (as previously agreed under the

Canadian-led "Dubai Process"). Participants also recommended that

Afghanistan harmonize border operating times with its neighbors, in

particular with Pakistan.



Business Event

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16. (SBU) The RECCA Business Conference was a busy networking event

for Afghan and Pakistani businessmen, with activity focused in five

groups: agriculture, infrastructure, industry and manufacturing,

services and banking, and trade. The group recommended that

governments and international donors address the weak infrastructure

in both Afghanistan and Pakistan and applauded U.S. legislation to

establish Reconstruction Opportunity Zones (ROZs),calling them

"catalysts for regional development" and a means to improve regional

law and order. Participants highlighted the need for financing at

concessional rates to support ROZ investment activity, and some

noted concerns that local industry should be protected in the face

of expanded transit trade.



17. (SBU) Comment: The third RECCA was noteworthy in no small part

because it happened at all. Frequent delays over the past two



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years, including an eleventh-hour postponement from the most

recently planned April 2009 dates, and the haphazard planning for

the business meeting left participants skeptical that the event

would come together. The UN and other donors (including the U.S.)

playing a more active role in the run-up certainly helped to focus

both the Afghan and Pakistani governments on concrete deliverables

vice headline-grabbing promises. The timing of the Islamabad RECCA

allowed us to consolidate with a broader international audience some

progress made at the U.S.-hosted trilateral summit in Washington and

to follow up on those commitments with specific action. It also

provided a venue for others, notably the European Commission, to

demonstrate their commitment to advancing tangible regional

cooperation in support of Afghanistan.

PATTERSON