NEW AFGHAN COMMERCE MINISTER TAKES THE HELM

UNCLAS SECTION 01 OF 02 KABUL 000064

DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR DELANEY AND DEANGELIS
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
USOECD FOR ENERGY ATTACHE
CENTCOM FOR CSTC-A
NSC FOR JWOOD
TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, AND MNUGENT
OSD FOR SHIVERS
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

SENSITIVE

SIPDIS

E.O. 12958 N/A
TAGS: ECON EFIN EAID ETRD ENRG WTO AF PK
SUBJECT: NEW AFGHAN COMMERCE MINISTER TAKES THE HELM

REF: A) KABUL 3290
B) KABUL 3277
C) KABUL 3211

SUMMARY


1. (SBU) Seven days into his new job, Minister of Commerce and
Industries (MOCI) Wahidullah Shahrani January 6 described to the
Ambassador an ambitious, market-oriented work program. Shahrani
said he will limit MOCI to policy and regulatory work, continue
efforts to enact pending commercial laws, craft transparent rules
and policies to promote business investment, and seek donor support
to build needed capacity at the ministry. He aims to commercialize
or corporatize the state-owned fuel importer whose corruption
contributed to his predecessor's impeachment. Shahrani hopes to
visit the U.S. in February or March for TIFA follow-up, and said
Afghanistan has accepted Pakistan's proposal to hold the next
Regional Economic Cooperation Conference April 3-4 in Islamabad.
The Ambassador welcomed Shahrani's energetic work plan and
private-sector orientation and said the USG will positively consider
technical support for his efforts. End Summary


2. (U) The Ambassador, accompanied by acting USAID Mission Director
and EconCouns, called January 6 on the new Minister of Commerce and
Industries, Wahidullah Shahrani. Formerly Deputy Finance Minister,
Shahrani assumed his new duties on December 28.

ROLE OF THE COMMERCE MINISTRY


3. (SBU) Shahrani said MOCI had lost momentum in recent years.
(Note: The unenergetic former Minister Farhang was abruptly
impeached by the National Assembly in late December over allegations
of corruption in fuel imports.) Shahrani said there are two schools
of thought in MOCI regarding its proper mission. Many officials
adhere to the old, statist view that MOCI should not just regulate
commerce but also own and run productive assets. But he supports a
more limited mission and intends to restrict the ministry's role to
setting policy and regulatory work.


4. (SBU) Shahrani agreed with the Ambassador that the private sector
must be the engine of Afghan growth and prosperity and said he will
to work to craft transparent and predictable rules and policies to
promote business investment. He noted that the WTO is politically
controversial in Afghanistan and that the government needs technical
support from donors to prepare for eventual membership.


5. (SBU) Shahrani described the capacity weaknesses at MOCI and said
he needs donor support to create a new Project Management Unit.
While at the Finance Ministry he drew on the UK-supported
Afghanistan Investment Climate Facility to hire professional staff,
and he hopes to do so at MOCI too. Young professionals would
gradually move into ministry management positions.

CORRUPTION IN FUEL IMPORTS


6. (SBU) Noting tensions with the IMF over the Fuel and Liquid Gas
Enterprise (FLGE, the state-owned fuel importer under MOCI - see Ref
B),Shahrani said that within 3-4 months he will develop a plan to
commercialize or corporatize FLGE. The reformed entity will not be
under any government ministry and will not enjoy any advantages over
other (commercial) importers. MOCI has hired a foreign auditing
firm to review FLGE, and its report, due soon, will inform future
action. FLGE's responsibility for regulating the quality of
imported fuel, which represents a serious conflict of interest and
opportunity for corruption, will be transferred to the Afghan
National Standards Authority, initially at the northern border port
of Hairatan, locus of regular allegations of malfeasance by FLGE.


7. (SBU) Noting the broader connection between infrastructure and
revenue generation, Shahrani said much of MOCI's border-crossing
facilities date from the 1960's and 1970's and badly need updating.
He said MOCI will develop a plan based on international best
practices that will identify the respective roles of the ministry
and the private sector in border management.


KABUL 00000064 002 OF 002



8. (SBU) Comment: In trying to reform FLGE, Shahrani will need to
wrestle with its corrupt but powerful director, Engineer Rozi.
Shahrani's deputy told us recently (Ref C) that the foreign auditing
firm the minister mentioned had given up trying to conduct a decent
review after FLGE refused to open its books. End Comment

COMMERCIAL-LEGAL FRAMEWORK


9. (SBU) Shahrani said that six of ten key commercial laws have now
been enacted. Four others are under review at the Ministry of
Justice, three of which will be debated by the Cabinet's legal
committee on January 11. MOCI will also draft implementing
regulations for the commercial laws and will focus on simplifying
procedures for business. Shahrani also said Afghanistan needs to
develop its commercial courts and needs technical assistance in this
effort.

USG READY TO SUPPORT THE NEW MINISTER


10. (SBU) The Ambassador welcomed Shahrani's energetic work plan and
private-sector orientation and said the USG will positively consider
technical support for his efforts. He noted Afghanistan's vibrant
trading culture and traditional role as a regional crossroads. He
stressed the importance of a transparent and predictable legal
environment, including effective dispute resolution mechanisms, to
promoting trade and investment, and said U.S. legal experts might be
able to help develop Afghan commercial courts. The Ambassador urged
the GIRoA to improve relations with Parliament, which would aid
efforts to pass commercial laws. Citing concerns over declining
Customs revenues, the Ambassador welcomed plans to reform FLGE and
improve border management at Hairatan, where the U.S. has a
particular interest because of fuel imports for the military effort.
He said the USG is also willing to help Afghanistan prepare for WTO
membership.

REGIONAL ECONOMIC COOPERATION


11. (SBU) Shahrani said Foreign Minister Spanta has agreed to the
Pakistani proposal to hold the third Regional Economic Cooperation
Conference (RECC) April 3-4 in Islamabad. This topic, among other
things, would be discussed during President Zardari's current visit
to Kabul, though no public statement on RECC was likely. EconCouns
urged early convening of separate, bilateral negotiations on a new
Afghanistan-Pakistan Transit Trade Agreement. Shahrani agreed but
did not indicate any date had yet been set.

BILATERAL COOPERATION


12. (SBU) Shahrani expressed appreciation for U.S. assistance to
Afghanistan and hope that high aid levels will continue under the
new Administration. U.S. Mission officials will be invited to a
meeting with other donors on January 21 to discuss MOCI's needs.
Shahrani stressed that any assistance requested would be based on
mutual commitment. He also reiterated Afghan support for the
Reconstruction Opportunity Zone initiative and said Afghan
investments in future ROZs will focus on products where the country
has a comparative advantage. The Ambassador expressed confidence
that the new Congress will approve ROZ legislation and urged Afghan
cooperation with future ROZs in Pakistani border areas as well.
Shahrani said he hopes to visit the U.S. in February or March, to
discuss follow up to Trade and Investment Framework Council talks
here in October.


13. (SBU) Comment. Shahrani is young, hard-working, and
market-oriented and has considerable experience dealing with foreign
donors. But he faces big challenges. His plan to take on FLGE will
be the first big test of his reformist commitments.

WOOD