UZBEKISTAN: GOU TO DAUSTR LILIENFELD: ROSES FOR A TIFA

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E.O. 12958: DECL: 2019/05/14
TAGS: ETRD ECON PREL UZ
SUBJECT: UZBEKISTAN: GOU TO DAUSTR LILIENFELD: ROSES FOR A TIFA
CORPSE

CLASSIFIED BY: Robert McCutcheon, Econ Officer, State, Pol/Econ
Office; REASON: 1.4(B),(D)


1. (C) SUMMARY. Deputy Assistant U.S. Trade Representative
(DAUSTR) Claudio Lilienfeld visited Tashkent on April 28-29 to
discuss U.S.-Uzbek trade relations and the future of the
U.S.-Central Asia Trade and Investment Framework Agreement (TIFA).
In meetings with GOU officials, the business community, and third
country commercial representatives, DAUSTR Lilienfeld heard both
the official view of economic and business conditions and the more
difficult street-level reality faced by businessmen. On TIFA,
First Deputy Prime Minister (FDPM) Azimov gave his blunt assessment
that this agreement is a corpse that should not be resuscitated.
The GOU clearly prefers to pursue a bilateral trade agenda with the
U.S. END SUMMARY



GOU EULOGY FOR TIFA

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2. (C) In a meeting lasting over an hour, FDPM Rustam Azimov began
by saying that many agreements concluded with the U.S. and other
countries have remained agreements on paper only. As to TIFA, he
said, "We have almost forgotten about TIFA." Azimov then launched
into a long monologue on Uzbek economic achievements under
President Karimov, in particular during this time of world economic
crisis.




3. (C) On U.S.-Uzbek relations, Azimov said that despite political
turbulence, economic relations are developing well. He pointed to
General Motors' (GM) joint venture with Uzavtosanoat as a prime
example. As to regional dialog, Azimov said that here, too, things
are going well. He noted in particular that relations with
Tajikistan are improving.




4. (C) On Afghanistan, Azimov pointed to the recent agreement on
transit of non-military goods as an illustration of President
Karimov's attention to the question of internal stability in
Afghanistan. He described Uzbekistan's construction of new power
transmission lines to supply electricity to Kabul, boasting that
"the people of Kabul know where their electricity comes from."




5. (C) DAUSTR Lilienfeld then explained to Azimov his role in
helping to develop new strategies and approaches to Central Asia at
USTR. On TIFA, he said his first priority was to explore whether
and how to improve the existing TIFA process. Expressing
appreciation for Azimov's candor, DAUSTR Lilienfeld remarked that
if the five Central Asian presidents are able to reach agreement on
water issues, then there is hope for regional cooperation. At the
same time, he said that one core objective of his visit was to
assess the prospects for bilateral discussions, believing that
these could provide a venue for discussing and implementing
measures to expand bilateral trade and investment, as we well as to
address bilateral issues such as GSP utilization, intellectual
property rights and other issues that normally comprise the agenda
for USTR's bilateral work. He then described a new U.S. initiative
to establish Reconstruction Opportunity Zones in Afghanistan with
provision for duty-free export to the U.S. and added that these
zones could provide opportunities to Uzbek manufacturers and
investors.




6. (C) Azimov replied that he understood "the TIFA toy has been
thrown on you" and recommended strongly that USTR not try to
reinvigorate it as it was originally envisioned. He continued that
the original TIFA model had been that of a professor, the U.S.,
lecturing to his students. "We don't need the U.S. or others to be
our arbiters," Azimov said. "We can resolve our issues between
ourselves." Azimov added that TIFA's role as a "consultant" was
also out of date, particularly insofar as the world economic crisis
had proven the intellectual bankruptcy of many former
"consultants." "What we need," Azimov said, "is investment, not

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advisors." Azimov continued that the GOU would be interested if
TIFA could catalyze investment in the region. He also suggested
that TIFA do something for education, noting that not one U.S.
university has opened a branch in Uzbekistan. He furthermore
expressed strong support for a bilateral U.S.-Uzbek trade dialog.




7. (C) Azimov offered his advice that USTR develop a working
strategy and avoid "appealing schemes" that do not work. In
particular, he advised the U.S. not to interfere in what it
perceives to be trade barriers in Central Asia, even going so far
as to say the U.S. would not welcome Uzbek "assistance" in its
trade relations with Mexico. "All issues in Central Asia can be
resolved only by presidents," Azimov said, "not by government
officers like us." Summing up, Azimov told DAUSTR Lilienfeld
bluntly, "TIFA is a corpse. Do not try to revive it. What we need
is direct foreign investment."



ON A LIGHTER GOU NOTE

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8. (SBU) DAUSTR Lilienfeld's other official GOU meetings struck a
much milder and more constructive chord. DPM Abdulla Aripov, who
heads the Communications and Information Agency of Uzbekistan,
described Uzbekistan as the telecommunications link that unites all
of Central Asia, and he suggested establishing data hosting centers
in Uzbekistan that would be capable of mirroring large
international databases. He described his interest in developing
information technology capabilities in Uzbekistan and urged that
U.S. manufacturers consider setting up operations in the Navoi
FIEZ. On intellectual property rights (IPR),said the GOU would
welcome any assistance the U.S. can give on IPR issues and in
particular wants training for IPR and copyright specialists. He
added that the GOU has begun working with Microsoft to improve
Uzbek IPR legislation.




9. (SBU) DAUSTR Lilienfeld also met with First Deputy Minister
Nasriddin Najimov at the Ministry for Foreign Economic Relations
and with Fayzulla Mullajanov, Chairman of the Board of the Central
Bank. At the latter meeting, after listening to a half hour
recitation of Uzbekistan's economic success and successes in the
banking sector, DAUSTR Lilienfeld remarked that a major
disincentive for U.S. businesses to invest in Uzbekistan is the
difficulty with capital convertibility. Expressing surprise that
convertibility could be an issue, Mullajanov responded that
conversion is done by the commercial banks. He assured us that he
would personally look into any convertibility problems if they are
brought to his attention in writing.



BUSINESS HOPES AND REALITY

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10. (SBU) In a long and rambling discussion, Alisher Shaykhov,
Chairman of the Uzbek Chamber of Commerce (UzCC),said he liked to
separate politics from business and that Uzbek businessmen want to
make a profit when and where they can. He repeated Aripov's hopes
that foreign computer and electronics manufacturers will set up
shop in Navoi, noting that the UzCC will be sending a group to a
computer conference in Nevada in May. On trade issues, Shaykhov
suggested it is best to "think regionally but act bilaterally" and
he added that "general meetings are meaningless." He asked for
U.S. assistance in attracting investors and expressed interest in
DAUSTR Lilienfeld's suggestion that UzCC put together road shows
that would travel to different cities in the U.S. to highlight the
capabilities of Uzbek industry and potential for tie-ups with US
industry.

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11. (SBU) DAUSTR Lilienfeld completed his time in Tashkent by
meeting with third country commercial and economic representatives
and with members of the American Chamber of Commerce (AmCham).
These meetings highlighted the reality of doing business in
Uzbekistan, where AmCham members told DAUSTR Lilienfeld that in
addition to currency conversion, access to local currency is a
major issue. A GM representative elaborated that GM is having
difficulty finding soums with which to pay its local workforce for
the simple reason that commercial banks do not have cash.
Expressing doubt over the Navoi FIEZ, one longstanding AmCham
member remarked that this is not Uzbekistan's first attempt to
establish a free economic zone. In his words, previous Uzbek
attempts to establish such zones in Samarkand and other Uzbek
cities in the 1990s all failed.



COMMENT

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12. (C) If DAUSTR Lilienfeld hoped to learn Uzbek views on
revitalizing TIFA, FDPM Azimov minced no words telling him that
TIFA is a "corpse." The GOU has no interest in continuing to
participate in TIFA in its current form and has expressed its clear
preference for a bilateral trade agenda with the U.S.




13. (U) DAUSTR Lilienfeld cleared this cable.
NORLAND