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
--------------
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