Kunar's Timber Industry and Smuggling: Solutions Await a

UNCLAS SECTION 01 OF 03 KABUL 003792 SIPDIS SENSITIVE E.O. 12958 N/A TAGS: EAID ENRG SENV ETRD EMIN EAGR EINV PREL AF SUBJECT: Kunar's Timber Industry and Smuggling: Solutions Await a New Cabinet REF: A. Kabul 2438 ¶B. Kabul 3479 ¶1. (SBU) Summary: With some of the most dangerous pockets of insurgency in Afghanistan, Kunar province sits on the country's eastern border with Pakistan's Federally Administered Tribal Areas (FATA). Rampant timber smuggling has long undermined faith in the government and supported local insurgents, while deforestation has seriously damaged watersheds and agricultural production. The Cabinet's September 28 decision to allow sales of stockpiled impounded timber will permit timber merchants to make licit money and should decrease fire hazards in population centers. However, this decision has yet to be implemented, with timber being increasingly smuggled out of lumber yards at night. Just as importantly, the National Assembly has yet to adopt a long-awaited Forest Law that will permit controlled harvests and donor participation in the development of a value-added wood-processing industry over the longer term. We are encouraging national and provincial leaders to move forward on these issues, but the Karzai government's transition to a new cabinet is likely to slow down this process at least another 1-2 months. End Summary. Smuggling and Deforestation - - - - - - - - - - - - - - ¶2. (SBU) By Presidential decree, harvesting timber for export has been illegal in Afghanistan since 2004. This ban, however, has not effectively protected the environment and has indirectly fostered a widespread smuggling network, rapidly depleting forests in Kunar and Nuristan provinces. Deforestation decreases agricultural productivity and water availability, depriving the region of potential jobs. Smuggling encourages corruption, undermines faith in the national and regional government, and supports the insurgency. Kunar Governor Sayed Fazlullah Wahidi brought ministerial attention to these issues when he hosted a timber shura in July (ref A). The lack of a legal framework for the logging industry puts Afghanistan in a lose-lose situation: timber and its associated enterprises and jobs move out of the country, while the environment and economic prospects are degraded. The Cabinet Decision to Allow Stockpile Sales - - - - - - - - - - - - - - - - - - - - - - - ¶3. (SBU) A September 28 cabinet decision to allow the sale of stockpiled illegally-cut timber represents a positive step that timber owners have long anticipated (ref B). The stockpiles represent a depreciating asset and fire hazard. In Kunar's capital Asadabad, stockpiles are located in the middle of residential neighborhoods, where a fire could have catastrophic consequences. Sales have not yet begun, however, pending cabinet approval of procedures and disposition of a high-level request for a stronger anti-corruption focus. As a result, frustrated merchants and power-brokers are increasingly smuggling timber out of the lumber yards at night. We are urging the Afghan government to announce and carry out their plan for licit sales as soon as possible. ¶4. (SBU) The draft procedures explicitly call for an "exact account" of the amount of stockpiles to be sold. During a November 1 meeting, Econoffs asked Finance Ministry Chief of Staff Safi if this amounted to an upper-limit "cap" on sales, as previously recommended by Kunar Governor Wahidi to prevent newly cut timber from being added to stockpiles. Although unwilling to commit to a sales cap, Safi said the Afghan government estimates about 5.47 million cubic feet of confiscated wood have been stockpiled and no more than this amount should be sold. (Note: When pressed, Mr. Safi said sale quantities would be announced and tracked, contradicting his earlier statement on October 6 that sale quantities would not be limited. While the possibility of a cap is a positive development, we are not confident it will be effectively implemented. End note.) ¶5. (SBU) The draft procedures also require weekly and monthly reporting of tax revenues from sales to Customs and the Ministry of Finance, with the resulting sales tax revenue to be spent primarily on infrastructure rehabilitation projects, pending Ministry of Finance and Presidential approval. Safi said some of the money will be directed to the originating timber-producing provinces, but emphasized such an arrangement could not be made public, since tax revenues officially go to the central government, not the provinces. PRT Kunar reports Governor Wahidi was confident, following his discussions with the Ministry of Finance, that fifty percent of tax revenue would be returned to Kunar. (Note: Wahidi's recent avoidance of the topic with PRT officers may indicate this proposal is shifting. End Note) New Forest Law Offers Hope for Engagement - - - - - - - - - - - - - - - - - - - - - ¶6. (U) A new Forest Law, currently in Parliament, is expected to be passed in 2010. Once adopted, the law will provide a statutory KABUL 00003792 002 OF 003 basis for international donors to engage with the Afghan Government on the creation of a sustainable cutting, reforestation, and value-added business cycle benefiting the country's timber-producing regions. We are working closely with parliamentary leaders to encourage its passage. In the interim, however, PRT Kunar is investigating options for an outreach campaign on conservation and reforestation, possibly through local mullahs, who are widely respected sources of information in Kunar. (Note: Security issues will restrict activities and entry into some areas. End note.) ¶7. (U) Afghan-leadership and community ownership are critical components of a long-term sustainable forestry plan. Otherwise, economic development could rapidly accelerate environmental degradation. Local government capacity-building and support for civil society are also essential, offering opportunities for international donor support. Local timber agribusiness development also call for tree nurseries for reforestation and wood-lot development, mobile sawmills, value-added furniture manufacture, increased artisanal work, and improved quality control to take advantage of the U.S. "Afghan First" policy promoting local procurement. Additional value-added production in Afghanistan will provide greater employment opportunities and improve security. Greater local value added through a stronger wood-processing industry will also prompt a sense of ownership in the province's timber resources, thereby strengthening the measures needed to safeguard and sustain these resources. Water and Irrigation - - - - - - - - - - - ¶8. (U) Kunar is a traditional agriculture area where changes in altitude provide a variety of growing zones suitable for grapes, wheat, fruit and nut trees. Locally-based NGOs and PRT elements recommend increased support for irrigation infrastructure, such as USAID's work on the 27 kilometer Salar Canal, the longest in Kunar, which will irrigate 3,500 hectares and benefit 8,500 families. The newly-arrived California National Guard Agribusiness Development Team (ADT) is building on these efforts and reviewing additional means to improve water access. A Kunar local leader told PRT and Emboffs on November 12 that potable water is one of his community's top three priority projects: the Embassy's new Sustainable Water Supply and Sanitation project (SWSS, providing $52 million nationwide over three years to address drinking water issues) can be deployed to address these local needs. Electricity: Key to Economic Development - - - - - - - - - - - - - - - - - - - - ¶9. (U) Improved electricity infrastructure will benefit almost any business, and greater job growth will improve security by providing fighting-aged males with jobs. Woodlot and furniture factory owners in Asadabad consider lack of reliable power the main hindrance to expansion of their businesses. Local representatives of the Ministry of Rural Rehabilitation and Development (MRRD) also described a pilot program of matching grants supporting a candy factory, cheese factory, bakery, and fish farm. ADT representatives are investigating options for a citrus processing factory and other value-added food processing, building on Roots for Peace, Madera, and other NGO donations of fruit trees in Kunar. ¶10. (U) Kunar's plentiful rivers have proven its best energy source. (Solar power is only suited for small-scale village projects such as street lights.) Asadabad has a community mini-hydro plant with the potential for 700KW output and a rarely-used 1MW diesel generator, although transmission losses and grid issues limit power available to the city. Owners of woodworking shops consistently use private generators instead of city power, calling city power "not strong enough" or reliable. Over the past few years, there has been significant PRT and Afghan government investment in mini- and micro- hydro throughout Kunar, but lack of maintenance training resulted in degraded and unreliable systems. In Asadabad, a recently-approved engineering study of the mini-hydro plant funded by the PRT will analyze generation, distribution, and sustainability of the plant and grid. PRT Kunar is also investigating the system's inefficiencies and may be able to request technical assessment and rehabilitation assistance through the Embassy's new Afghan Clean Energy Program (ACEP, $83 million nationwide over four years). Roads and Border Crossings - - - - - - - - - - - - - - ¶11. (SBU) CERP funding is improving access to the Nawah Pass with a 13km paved road due for completion by March 2010, allowing an easy two-hour drive to Peshawar in Pakistan. We are exploring with the Afghan government the possibility of opening and staffing the crossing by that time to ensure it does not develop into a new smuggling route. People and goods currently only cross on foot and reload to local vehicles on the other side. Over the longer term, the official opening of this crossing with the government of KABUL 00003792 003 OF 003 Pakistan could bolster the local licit economy by providing an alternative to the Torkham Gate crossing to Pakistan. A better connection to Pakistan will encourage timber firms to export their products. However, the draft Forest Law will need to be amended to legalize exports of raw timber. This anti-export strategy would indirectly foster greater timber smuggling into Pakistan, in the absence of adequate border crossing forces to interdict illicit trade. Afghan authorities are aiming to rebuild wood-working industrial capacity in the region to keep jobs in Afghanistan and put it on a competitive footing with the more advanced Pakistani industry. Gemstones - - - - - ¶12. (SBU) Kunar's Chapa Dara district and the Pech River Valley also produce gemstones, including tourmaline and emeralds. Chapa Dara is one of the province's few districts to maintain most of its forest cover, primarily because the local communities have focused on gem smuggling instead of timber smuggling. Gemstones are currently smuggled to Pakistan, where skilled cutting increases the value of the raw stones more than tenfold. An Embassy project through USAID to reinforce Afghanistan's "mines to market" value chain for gemstones through training (on-site mining safety, cutting and testing),equipment supply, public-private partnerships, market linkages, and industry infrastructure strengthening could be useful if implemented in Kunar. A new gemstone market opened in Jalalabad, the capital of neighboring Nangarhar province on November 14, and there may be opportunities to provide training associated with this private market, increasing employment opportunities and local revenues. Comment - - - - ¶13. (SBU) We are working closely with local and provincial leaders, who agree that accelerating Kunar's economic development constitutes the most effective way to improve security and reduce the appeal of the insurgency. This effort will call for significant investment in infrastructure and a sustainable use plan for Afghanistan's forests, thereby protecting its watersheds, spurring job growth, and ultimately making the region safe enough for Afghan security forces to take responsibility for the area. ¶14. (SBU) Over the short term, we continue to push for the rapid implementation of licit timber sales. Nonetheless, we anticipate that the Karzai government's transition to a new cabinet is likely to slow down this process at least another 1-2 months. In addition, we are encouraging the Parliament's passage of the vitally needed Forest Law to legalize new timber cutting. Parliamentarians recognize the need for action, and we are cautiously optimistic that the law will be passed in 2010 following the upcoming winter recess. Eikenberry