Afghans Seek 55 Priority Advisors and Claim Revenue

UNCLAS SECTION 01 OF 03 KABUL 001734

DEPT FOR SRAP, SCA/FO, SCA/RA, AND SCA/A
DEPT PASS FOR AID/ANE
DEPT PASS USTR FOR DELANEY AND DEANGELIS
DEPT PASS OPIC
DEPT PASS FOR TDA FOR STEIN AND GREENIP
USOECD FOR ENERGY ATTACHE
CENTCOM FOR CSTC-A
NSC FOR JWOOD
TREASURY FOR JCASAL, ABAUKOL, AWELLER, AND MNUGENT
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH

SENSITIVE

SIPDIS

E.O. 12958 N/A
TAGS: ECON EAID EFIN AF
SUBJECT: Afghans Seek 55 Priority Advisors and Claim Revenue
Success

SUMMARY


1. (SBU) The JCMB Standing Committee on Development broadly endorsed
the Afghan government's revised Civilian Technical Assistance Plan
asking for 55 urgently needed advisor positions. Subsequently, the
Finance Minister signaled he hopes donors will provide funding for
the Afghan government to directly hire the advisors. The GIRoA also
announced an almost 100 percent increase in recent revenue
collection and specific steps to achieve further improvement.
Separately, the IMF resrep described the revenue performance as
positive but fragile and urged the U.S. and other donors to press
for structural reforms to secure lasting improvement in GIRoA fiscal
performance. The request for the advisors and other issues will be
considered at a JCMB plenary on July 8. End Summary


2. (SBU) The JCMB Standing Committee on Economic and Social
Development convened June 23 to prepare for the JCMB plenary to be
held on July 8. The meeting was co-chaired by UN SRSG Kai Eide and
Afghan Finance Minister Omar Zakhilwal. The U.S. was represented by
Ambassador Wayne, newly arrived Coordinating Director for
Development and Economic Affairs. Eide opened the meeting by
announcing that Zakhilwal would also become Afghan co-chair of the
JCMB, replacing Senior Minister Hedayat Arsala. Eide said the July
8 meeting would be the last JCMB before the August 20 elections and
that it was important for Afghans and the international community to
make progress on development now and sustain the momentum through
the inevitably distracting election period. Zakhilwal praised the
"new spirit of coordination among donors" and also hoped the
election period would not interrupt this improved cooperation.

CIVILIAN TECHNICAL ASSISTANCE PLAN


3. (SBU) Zakhilwal summarized the GIRoA's revised request for
civilian technical assistance (TA),which was circulated to donors
on June 22 (and emailed to SCA/A). The revised plan retains the
principles for TA articulated in the GIRoA's original TA plan from
April, but prioritizes some 55 advisor positions urgently needed and
elaborates on delivery mechanisms. Zakhilwal said the GIRoA wants
to implement this strategy in two phases: 1) immediately deploy
urgently needed TA to priority areas of government through existing
delivery mechanisms; and 2) develop a sustainable, Afghan-led
program - the National Capacity Development and Technical Assistance
Program (NCDTAP) - to manage TA in the future. The GIRoA seeks a
pooled, basket-funding mechanism to finance the NCDTAP.


4. (SBU) Zakhilwal further proposed creation of new Task Force on
Civilian TA, which he said should meet immediately after the
requested approval of the whole scheme at the July 8 JCMB. The task
force would work to place the 55 urgently needed TA's, monitor their
work, and steer creation of the NCDTAP. He urged donors to apply
the principles of the TA plan in selecting the 55 TA's, which he
hoped could be deployed within a few months, and especially stressed
the need for Afghan ownership and for advisors with knowledge of
Afghan languages and culture. Regarding the new plan's relation to
the original April plan, Zakhilwal said, "The old document is now
history."


5. (SBU) Donors generally supported the revised TA plan. Ambassador
Wayne said the U.S. plans a significant increase in civilian TA and
welcomed the GIRoA effort to improve coordination and prioritize its
requests. He said the U.S. wants to align our assistance with
Afghan needs and would seek to attract qualified advisors from the
region. He also said UNAMA should play a role in coordinating TA.
The U.S. would review the requests for urgently needed TA and see
where we could contribute.


6. (SBU) The World Bank rep supported the first phase of the
proposed plan but expressed concerns about the NCDTAP. She said the
Bank does not believe there can be a single National Program that
can effectively deliver TA for capacity development in public
institutions. The latter is a broader concept involving a mix of
interventions beyond TA. She also said a pooled approach to TA
delivery had been tried before in Afghanistan - the World
Bank-managed Technical Assistance and Feasibility Studies program -
and found to be ineffective. It was left that the GIRoA would

KABUL 00001734 002.2 OF 003


circulate a new document reflecting donor comments prior to JCMB
consideration of the TA plan.


7. (SBU) On June 30, the Finance Minister told USAID Mission
Director Frej that he would prefer if the U.S. and other donors
provided funding directly to the Finance Ministry for the GIRoA to
hire the advisors. He argued that donors could establish
appropriate mechanisms to monitor use of funds. (Post is
considering this proposal.)

REVENUE ACTION PLAN


8. (SBU) In the June 23 Standing Committee meeting, Zakhilwal said
measures taken since he became finance minister in February have
already significantly boosted revenue collection. In the first
quarter of Afghan FY 2009-10 (3/20-6/20) the government collected
Afs 16.1 billion ($322 million) in all forms of revenue, up from Afs
8 billion ($160 million) in the same period of the previous year.
He said GIRoA collected an average of Afs 2.8 billion ($56 million)
per month in customs revenue in this period, up from Afs 1.6 billion
($32 million) last year. Zakhilwal said the government can deliver
even stronger results moving forward. He described his new Revenue
Action Plan, which includes numerous specific measures further to
increase revenue as well as specific requests for donor assistance,
some of which, the plan notes, the U.S. is already fulfilling.
Zakhilwal admitted that the technical advisors needed to support the
plan are in addition to the 55 urgently needed TA's identified in
the Civilian TA Plan.


9. (SBU) Donors strongly welcomed the good news on revenues and
expressed support for the new plan. They said recent progress
confirmed their long-held view that the GIRoA could improve revenue
collection and they looked forward to continued improvement. The
World Bank rep and USAID Mission Director both noted that some
elements of the Revenue Action Plan should become benchmarks under
the ARTF Incentive Program, thus offering a concrete donor reward
for good performance. The Standing Committee agreed to recommend
the Revenue Action Plan to the JCMB plenary for approval.

IMF'S CAUTION ON FISCAL PERFORMANCE


10. (SBU) In a separate meeting with Ambassador Wayne and Mission
staff June 29, IMF resrep (protect) noted the improved revenue
collection and said it was fine for donors to welcome it. But he
cautioned that the improvement was fragile, depended on the activism
of a few (replaceable) leaders, and has been achieved mainly by
reducing tax leakage resulting from corruption, not durable,
structural reform of the tax system. At 7 percent, Afghanistan's
revenue-to-GDP ratio remains the lowest in the world. He further
worried about increased spending pressure in the run-up to the
August elections, and that the international community would lose
important leverage to promote fiscal reforms after completion of
HIPC debt reduction, tentatively scheduled for November. The IMF
resrep urged the U.S. and other donors to support structural reforms
to help lock in and strengthen the revenue performance achieved to
date.


11. (SBU) Ambassador Wayne agreed and said the U.S. would work with
other donors to deliver this message to the GIRoA. He said the
Mission might also issue a public statement following an expected
Zakhilwal press conference where he would announce the improvement
in revenue collection. Zakhilwal told Ambassador Wayne at another
function on June 29 that donor pressure to continue reforms and to
meet IMF program requirements was important to moving ahead with his
own efforts.

PRIVATE SECTOR DEVELOPMENT


12. (SBU) Commerce Minister Shahrani briefly reported to the
Standing Committee on progress in the five priority areas for
private sector development endorsed by the April JCMB: trade and
transit facilitation, licensing reform, support for value-added
processing, investment promotion, and capacity development. He went
into detail on donor-supported plans to reform business licensing.
Noting current, multiple mandates (20 authorities responsible for 50

KABUL 00001734 003 OF 003


licenses),Shahrani said the GIRoA wants to make it easier to start,
register, and formalize businesses. The GIRoA will start with
reforms in the Ministry of Commerce and Industries, then move to
other ministers, and ultimately aim for an integrated, automated,
GIRoA-wide one stop shop for business licensing. The The U.S. and
other donors expressed support for Shahrani's plans. Co-chair
Zakhilwal welcomed the Standing Committee's endorsement but added
that cabinet approval would first be needed before the GIRoA would
ask the JCMB to approve the one-stop shop idea. (Comment: This
latter proviso implies that some ministries might resist
relinquishing their licensing prerogatives.)

ANDS MANAGEMENT INFORMATION SYSTEM


13. (SBU) The Ministry of Economy briefed on plans to develop
information management processes related to its responsibility for
monitoring and evaluation of projects implemented under the ANDS.
The UK (DFID) and UNDP will provide TA to develop such processes.
The program will start on a pilot basis.

EIKENBERRY