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Cablegate: Afghanistan: Opic Visit Boosts Investment and Secures

VZCZCXRO6684
RR RUEHDBU RUEHIK RUEHPW RUEHYG
DE RUEHBUL #1525/01 1251138
ZNR UUUUU ZZH
R 051138Z MAY 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 7870
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0443
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC

UNCLAS SECTION 01 OF 03 KABUL 001525

SIPDIS

SENSITIVE, SIPDIS

DEPARTMENT FOR SCA/FO, SCA/A, EB/CBA, EB/OIA
STATE PASS TO USAID (MWARD)
STATE PASS TO OPIC (MOSBACHER, ZAHNISER)
STATE PASS TO USTDA (STEIN, GREENIP)
NSC FOR AHARRIMAN
CENTCOM FOR CG CSTC-A
COMMERCE FOR DFONOVICH AND VDEES

E.O.12958: N/A
TAGS: EINV EFIN ENRG ETRD BEXP AF
SUBJECT: AFGHANISTAN: OPIC VISIT BOOSTS INVESTMENT AND SECURES
MARRIOTT HOTEL DEAL

REF: A. KABUL 1468 B. KABUL 1448 C. KABUL 1206 D. KABUL 1033 E.
KABUL 935

This message is sensitive but unclassified--not for Internet
distribution.

-------
SUMMARY
-------

1. (SBU) OPIC President and CEO Robert Mosbacher came to Kabul on 21
April to accompany Dole CEO David Murdock and to examine potential
investments in Afghanistan. The visit coincided with the first,
US-assisted Afghan AgFair for agricultural buyers. When Mosbacher
left on 23 April, he had not only discussed agri-business
investment, but also closed a land lease for a new $80 million
Marriott hotel in Kabul; presented a potential expedited equipment
purchase proposal for the Kabul electricity initiative to add 100 MW
of power generation; and discussed energy, mining, carpets, and
trucking investments, access to credit, and other projects in
meetings with GoA officials and private businessmen. Ambassador
Wood and Mosbacher used a key meeting with President Karzai to break
a log-jam on the hotel deal. (Murdock visit was reported via Ref B.)
End Summary.

2. (U) Embassy arranged a program of senior government and private
sector meetings from April 21-23 for Robert Mosbacher, President and
CEO of the Overseas Private Investment Corporation (OPIC). OPIC
Chief of Staff Dulce Zahniser traveled with Mr. Mosbacher. The OPIC
team timed their visit to accompany Dole CEO David Murdock and
coincide with the Ministry of AgricultureQs US-assisted AgFair, a
three-day event for agricultural buyers, sellers and organizations.
(Murdock visit was reported via Ref B.)

---------------------
Marriott Lease Signed
---------------------

3. (SBU) The Marriott deal was signed in a public ceremony on 23
April with Minister of Commerce and Industry Farhang. The lease
between the GoA and TAYL Investors Group will pave the way for
building an $80 million Marriott hotel on a parcel of land adjacent
to the Embassy, on the main road between downtown Kabul and the
airport. The lease agreement had been hung up on a demand by the
Afghan MFA, one of the parcelQs owners and the lead negotiator for
the GoA, for a five-room set-aside for the benefit of the MFA. The
room set-aside benefit had been agreed to in the long-defunct
December 2003 land lease agreement between the GoA and a previous
group of investors who wanted to build a Hyatt Hotel on the same
location.

4. (SBU) In coordination with OPIC, Embassy had laid groundwork for
the lease deal with key members of the GoA High Commission on
Investment. With the exception of the MFA, we had developed a
consensus among other HIG members on an alternative concession to
the GoA proposed by the developers (a 25 percent across-the-board
discount for all GoA employees). In advance of the visit, the issue
was teed up with the Commerce Minister, and bolstered with a
Mosbacher to President Karzai letter, with the aim of leveraging the
visit to close the deal.

5. (SBU) To tip the scale, Ambassador Wood and Mosbacher (and
Murdock) met with President Karzai on April 22. During the Karzai
meeting, Mosbacher and the Ambassador were able to press for prompt
resolution to secure the hotel deal and signal to investors that
Afghanistan is open to business. The Embassy arranged an immediate
follow-on meeting with Minister of Commerce and Industry Farhang to
finalize lease arrangements and the approval process within the GoA.
With strong support from Karzai, and active engagement of the
Ministries of Commerce and Finance, and the Afghan Investment
Support Agency (AISA), the Government was able to arrange a special
High Commission on Investment meeting during the visit to secure
final GOA authorization of the lease agreement (copies provided to

KABUL 00001525 002 OF 003


OPIC, SCA/A, and EB/OIA.)

-----------------------
Bringing Power to Kabul
-----------------------

6. (SBU) On enhancing electricity supply in Kabul by 100 MW -- a
priority issue for us and the GOA -- Mosbacher unveiled a proposal
from a leading generator manufacturer for an expedited delivery and
installation schedule for new diesel/HFO-fueled generator capacity.
Minister of Economy Shams expressed strong interest because of the
long waiting lines and production schedules for new generators.
Mosbacher was able to get a promise of delivery of an initial 30 MW
package through his contacts with the CEO of the manufacturer.
Under this proposal, the initial 30 MW of capacity would be on-line
months sooner with a good likelihood of the 100 MW being in place by
the winter of 2008-2009. (Note: Subsequently we have learned that
other manufacturers/vendors may be able to match the expedited
delivery schedule proposal that Mosbacher brought. This allows us
to conduct a competitive procurement for which a Request For
Proposal for 100 MW of generator capacity was released on behalf of
the USG on May 1. The bids are due in May 15, followed by a
selection process and placement of the order by May 31.)

7. (SBU) In meetings with Minister of Economy Shams, Mosbacher also
discussed the need to be proactive in enabling prospective
independent power producer (IPP) projects and identifying the
customers they would service. He urged Shams to work with urgency
to establish a legal and regulatory framework that attracts IPPs.
He emphasized the need to develop this market in such a way that the
public utility -- especially as it is corporatized and then
privatized -- not be left with a base of low-return customers.
Embassy staff briefed Mosbacher on the work they have done to
support this initiative. They also highlighted a critical funding
need for the services of legal experts, one familiar with
Afghanistan and its power sector and the other with international
experience, to help develop this framework. Mosbacher raised this
issue with Minister Shams. Mosbacher encouraged the GoA not to be
over-cautious about oil exploration for fear of losing to sharp
investors. It would be better to take a risk and deliver a small
win soon than leave the resource undeveloped.

--------------------------------------------- -------
Mining, Aynak Copper, Access to Credit, Other Issues
--------------------------------------------- -------

8. (SBU) Mosbacher raised the Aynak copper mining tender process
with Shams and with Minister of Commerce and Industry Farhang,
urging that the GoA ensure transparency and consider the longer term
prospects for the partner relationship, rather than just the initial
offer terms. He underscored that the American bidder, Phelps Dodge,
has a long record of successful mining development and world-leading
technology--both important considerations over the longer term.
Shams and Farhang, both of whom are on the tender selection
commission, said that they understand the importance of looking
beyond the initial terms of the bid.

9. (U) In several meetings with USG and GoA agencies, Mosbacher said
that coordination between the private sector, development agencies,
and governments would be needed to follow up on investment interest
from DoleQs David Murdock not only in agriculture but also in
carpet, marble, and possibly cashmere production and export. A
meeting with the USAID-funded Afghan WomenQs Business Federation
provided a useful discussion of recent efforts at creating an
Afghanistan carpet brand and ways in which these efforts could mesh
with potential U.S. private investment. Mosbacher and Mission staff
also discussed an ARG-led truck leasing initiative which, when
developed, would provide leasing capital for financing of truck
fleets to selected, qualified operators in Afghanistan. Mosbacher
briefed USG, GoA, and Afghan and U.S. private players on upcoming
OPIC projects to provide access to credit for small and medium-sized
enterprises, as well as a potential U.S. industry source for
low-cost solar power for civic buildings in remote areas.

KABUL 00001525 003 OF 003

-------
COMMENT
-------

10. (U) MosbacherQs visit, his second to Afghanistan this year,
amplified the theme of his January trip: that the U.S. is committed
to helping Afghanistan by helping its private sector grow. The
Marriott hotel deal, in itself an important investment, should
cement that message as a major American brand becomes a landmark for
visitors to Kabul. Similarly, the competitive procurement of
gensets to provide an additional 100 MW of power for Kabul will
produce a visible difference in AfghanistanQs capital, with positive
implications for political stability. OPICQs proactive engagement
on these and a number of small and medium-size projects here is
making a difference, and we look forward to continued follow-up work
together. End comment.

WOOD

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