UZBEKISTAN ROLLS OUT RED CARPET FOR DEFENSE LOGISTICS AGENCY

C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000103

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AMEMBASSY HELSINKI PASS TO AMCONSUL ST PETERSBURG
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AMEMBASSY ASTANA PASS TO USOFFICE ALMATY
AMEMBASSY NEW DELHI PASS TO AMCONSUL HYDERABAD

E.O. 12958: DECL: 2019-01-23
TAGS: ECON EFIN EAID EINV ETRD KCRM SOCI UZ
SUBJECT: UZBEKISTAN ROLLS OUT RED CARPET FOR DEFENSE LOGISTICS AGENCY

CLASSIFIED BY: Robert McCutcheon, Economic Officer; REASON: 1.4(B),(D)


1. (C) SUMMARY. As part of the continuing effort to establish a
Northern Distribution Network (NDN) to support U.S. forces in
Afghanistan, a Defense Logistics Agency (DLA) delegation visited
Tashkent on January 13-15 to look at opportunities for local
procurement. Local procurement is something the Uzbeks, including
President Karimov, view as a major benefit of cooperation on NDN,
and the GOU went to great lengths to help its industry put on its
best face. Embassy Tashkent believes that local procurement, in
addition to its possible economic benefits, is a vital component of
guaranteeing safe and expeditious logistical support through
Uzbekistan. Even at the expense of greater initial effort or
investment, we strongly encourage DLA to follow through with
procurement in Uzbekistan. END SUMMARY



GOU PULLS OUT ALL STOPS FOR DLA

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2. (SBU) A four-person delegation from DLA came to Tashkent on
January 13-15 to investigate possibilities for local procurement in
support of forces in Afghanistan. Their visit included meetings
with Minister of Economy Khodjaev and Minister of Foreign Economic
Relations Ganiev, a commercial exhibition organized exclusively for
DLA, meetings with business representatives, and site visits to
large bakery and cooking oil production plants as well as several
factories and other facilities in the Tashkent area.




3. (SBU) Minister of Economy Khodjaev welcomed the DLA group,
noting that with more than 16,000 companies in operation in
Uzbekistan today, the DLA delegation would be able to see only 1
percent of the country's potential. Saying he was aware DLA is
primarily interested in procuring subsistence products such as
water and juice, construction materials, and possibly fresh fruits
and vegetables, Khodjaev said Uzbekistan has much it could provide
in all these categories. In addition, Nestle is producing bottled
water and milk, and Coca-Cola has three bottling plants.




4. (SBU) The DLA delegation went next to the National Exhibition
Hall, Uzbekistan's largest exhibition center where major events
such as the International Cotton Fair are usually hosted. On this
occasion, however, the exhibition hall had been taken over by the
Ministry for Foreign Economic Relations, Investments, and Trade
(MFERIT),which had organized a large trade exhibition exclusively
for the four-person DLA delegation, using as a guide a "Top 50"
list of products now shipped to Afghanistan that DLA had provided
earlier. For an entire afternoon the DLA group was able to visit
exhibition booths covering the breadth of Uzbek economic activity.
The booths were organized by production associations that included
Uzbek Railways, Uzstandart (Uzbekistan Standards Association),
Uzneftmahsulot (Uzbek Fuel and Lubricant),Uzbekyengil Sanoat
(Uzbek Textile Assoc.),Sovplasital OJSC (plastics),
Uzgushsutsanoat (Uzbek Meat and Dairy),and others.




5. (SBU) On January 14 the DLA group returned to the exhibition
hall for the morning. In the afternoon they broke into two groups,
one going on site visits to a large bakery as well as a cooking oil
production facility and the other holding meetings with
representatives of firms that are members of the American Chamber
of Commerce (AmCham) in Tashkent. AmCham members who participated
in these meetings included JMP Intl. (fruit juices),BNZ Swiss
Center (Uzbek distributor for Hilti, Snap-On Tools, and other
European companies),Classic International (import-export),and
Panalpina Central Asia (shipping). On the morning of January 15
DLA visited the Coca-Cola bottling plant in Tashkent, where
production has been halted for over a month due to an as-yet

TASHKENT 00000103 002 OF 002



unexplained cutoff in natural gas.




6. (SBU) The DLA delegation's visit ended with a meeting with
Minister for Foreign Economic Relations Ganiev, who told the group
that Uzbekistan is open to their proposals and is ready to comply
with DLA standards and requirements. He pointed to Uzbekistan's
minimal transportation costs and highlighted Uzbekistan's
experience of trade with Afghanistan, which has grown from $90
million in 2003 to over $500 million in 2008.




7. (SBU) The DLA delegation was effusive in expressing its
appreciation to Minister Ganiev. They noted that juice and
Coca-Cola products are likely candidates for procurement in the
near future with fresh fruits and vegetables possibly to follow
later. The bakery and cooking oil plant that the delegation
visited also show promise. Paint and construction materials,
specifically lumber and plywood, might be the subject of further
dialog. DLA explained that a next step would be for a veterinary
team to visit Uzbek production facilities, although some facilities
such as Coca-Cola and Nestle, which is already certified to
provided bottled water to US standard, may also be easily approved
to provide juices as well as milk (liquid and power).




8. (SBU) Minister Ganiev pointed out that Uzbekistan already meets
ISO 9001 standards and is ready to tailor this to meet U.S.
requirements. He reiterated that Uzbekistan is open for all
proposals. "If an industry does not exist in Uzbekistan," he said,
"we are prepared to create it."



COMMENT

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9. (C) The fact that the Uzbek Government took over the entire
National Exhibition Hall to host a major exhibition just for this
4-person delegation reflects the seriousness with which the GOU
views the potential for a commercial relationship with the U.S.
military. Procuring needed supplies from Uzbek suppliers is very
attractive both to Uzbek businessmen and to the GOU. It makes the
NDN more attractive to the GOU, which was frustrated at the lack of
local procurement at the time the U.S. military operated its air
base at Karshi-Khanabad (K2). President Karimov has told the
Ambassador that the lack of U.S. local purchasing for military
supply and economic development in Afghanistan was a major
disappointment to the Government after it took the risk of making a
base available to U.S. forces after 9/11. There is no question
this issue contributed to a fraying of the bilateral understanding
and cooperation even before the events in Andijon in 2005. We
should not repeat the mistake of overlooking local economic benefit
as a major factor in securing sustained political support for
transit by creating a constituency of stakeholders beyond
Uzbekistan's corridors of power.
NORLAND

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