Cablegate: 2008 U.S.-Central Asia Tifa Council Meeting

DE RUEHDBU #0895/01 1900857
R 080857Z JUL 08




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REF: 2007 STATE 117583

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1. (SBU) SUMMARY: The fourth meeting of the U.S.-Central Asia Trade
and Investment Framework Agreement (TIFA) Council, held June 17-18
in Dushanbe was marked by strong participation by the private sector
and by Afghan observers. However, representatives from the TIFA
members themselves failed to address issues raised by private sector
and NGO participants and the discussion sessions elicited little
discussion. Kyrgyzstan did not even send a representative from the
capital. While the delegations did not officially adopt the draft
Action Plan for further cooperation, they promised to send their
comments on it to USTR, which could lead to adoption of the action
plan later this summer. END SUMMARY.

2. (U) The Delegations:

AFGHANISTAN (OBSERVER) -- Mr. Azim Mukhammad, Head of the
Directorate of International Trade and Industry
KAZAKHSTAN -- Mr. Almas Kosunov, Deputy Minister of Industry and
KYRGYZSTAN -- Mr. Turatbek Esenkulovich Djunushaliev, Ambassador of
Kyrgyzstan to Tajikistan.
TAJIKISTAN (HOST) -- Mr. Gulomjon Bobozoda, Minister of Trade and
Economic Development
TURKMENISTAN -- Mr. Kurbanmurad Kurbanmuradov, Minister of Economy
and Development
UNITED STATES -- Mr. Mark Mowrey, Acting Assistant United States
Trade Representative for Europe and Middle East
UZBEKISTAN -- Mr. Narsiddin Nazhimov, First Deputy Minister of
Foreign Economic Relations, Investments and Trade


3. (U) The first day of meetings brought together government,
business, and NGO representatives in panel sessions focusing on
improving Central Asian trade facilitation, government efforts to
reduce administrative barriers in trade, and improving logistics and
regional trade and transit infrastructure.

Trade Facilitation:

4. (U) William Veale, Executive Director of the U.S.-Kazakhstan
Business Association, chaired the panel on trade facilitation.
Veale opened by saying the goal of business is to serve a larger
market from a base in the region. He cited the case of FedEx
operations in Kazakhstan as an example of the success that can be
achieved. Under an arrangement whereby customs questions are dealt
with after deliveries are made, FedEx is able to bypass bureaucratic
delays for more efficient operations. Ainura Cholponkulova,
Executive Director of the American Chamber of Commerce in
Kyrgyzstan, followed by talking about the successful conference on
Development of Trade, Transportation, and Transit held in Bishkek in
April that brought together 150 business and government
representatives who adopted an action plan calling for
simplification of cross-border transit and establishing a National
Council for Trade and Transport that will allow for closer
government-business cooperation. Temirbek Shabdanaliev, Executive
Director of the Kyrgyz Transporters Association and Kairat
Kasymbekov from the Forum of Entrepreneurs of Kazakhstan spoke about
a World Bank (WB) project that used a variety of measures to monitor
the efficiency of trade and transport performance. In particular,
Mr. Shabdanaliev was able to cite, with great specificity, the
dollar amount for bribes required to cross many borders.
Nevertheless, the study showed a trend towards improved efficiency
QNevertheless, the study showed a trend towards improved efficiency
in customs operations overall in 2007 as compared with 2006. David
Featherstone, USAID Regional Trade Liberalization and Customs
Advisor, spoke about the need to improve transparency and access to
information, citing the lack of a single comprehensive government
trade website in any Central Asian country. Featherstone noted that
an independent website covering Central Asian trade issues is under
development at

Administrative Trade Barriers:

5. (U) The heads of delegations next spoke about government efforts
to reduce administrative trade barriers. The Kazakh representative
reviewed the deficiencies of Kazakhstan's current border-crossing
regime, but he pointed to the law on imports and exports adopted in
October 2007, under which he said Kazakhstan has adopted the
principal of a "Single-Window" for processing of import and export
documents. Kazakhstan has created an inter-agency system for

DUSHANBE 00000895 002 OF 005

monitoring cross-border trade, and he noted that Kazakhstan ranked
near last in Central Asia in the number of documents needed for
processing of imports and exports.

6. (U) The representative of Turkmenistan gave a general
presentation on his country's current economic situation and plans
for future development. The presentation did not address specific
administrative trade barriers. The Uzbek representative said
Uzbekistan was working to improve its customs procedures and that
the situation was improving. His presentation also did not address
specific trade barriers.

Improving Logistics:

7. (U) Hugo Minderhoud, American Chamber of Commerce Uzbekistan,
chaired the panel on improving logistics and regional trade and
transit infrastructure. He emphasized the need for improved
integration across the region. Bahriddin Azamatov, Asian
Development Bank, described the work of the Central Asian Regional
Economic Cooperation (CAREC) Program. CAREC aims to develop and
improve transport corridors, and has six road projects completed or
underway. Representatives from the governments of Tajikistan and
Kazakhstan then enumerated their countries' spending on road, rail,
and airport projects. A Tajik representative noted that the
U.S.-built bridge connecting Afghanistan to Tajikistan was an
important step in improving North-South trade, but that it had yet
to be fully exploited.


8. (U) The government to business panels were followed on the first
day by a presentation on the creation of regional electricity
markets. Participation in this discussion was limited to government
only. George Krol, Deputy Assistant Secretary of State for South
and Central Asia, chaired the session on building regional
electrical markets. Saying that "market mechanisms can help all of
us," he encouraged the building of an electrical link to South Asia
to bring economic growth and stability to Afghanistan and western
Pakistan. Abdul Wakil from the Afghanistan Infrastructure
Rehabilitation Program continued this theme, noting that Afghanistan
had to "start over again from point zero" to build an electrical
infrastructure. He gave a detailed account of the status of the
Afghan North East Power System for electrical generation,
transmission, and distribution.

9. (U) Khamidulla Shamsiev, Director of the Coordinating Dispatch
Center briefly described the Center's role in coordinating
electrical transmission throughout the Central Asian region. Chief
Dispatcher Umar Karimov stressed the need for transparency and the
harmonization of databases maintained by utilities in all Central
Asian countries, to bring the collection of data to a level that
will allow electrical costs to be computed in Central Asia just as
they are in the developed markets of Europe.

10. (U) Akram Sulaimanov, Tajik Deputy Minister for Energy and
Industry, spoke on the Central Asia South Asia Electricity
Transmission and Trade Project (CASA 1000) to build an energy
corridor linking Central Asia with Pakistan. He gave a detailed and
optimistic account of current implementation status and provided
projections of growing power demand through 2020.


11. (U) The second day of meetings consisted of the Fourth Annual
U.S.-Central Asia TIFA Council, attended by government delegations.
QU.S.-Central Asia TIFA Council, attended by government delegations.
The agenda covered a range of issues, including practical problems
of trade, benefits of the Single-Window policy, developments in the
Central Asian investment climate, access to information on
import/export procedures, and the TIFA Action Plan for 2008-09.

12. (U) The TIFA Council meeting was opened by the Tajik Minister of
Trade and Economic Development, Mr. Bobozoda. In his opening
remarks, Mr. Bobozoda said that for the past several years the TIFA
Council had proven an effective, practical instrument to strengthen
trade cooperation and improve the investment attractiveness of
Central Asian countries. He noted the practical problem presented
by the fact that Central Asian capitals were at least 2000
kilometers from the nearest sea ports, but emphasized that Central
Asia could serve as a transit route for trade from throughout the
Eurasian continent if Central Asian countries removed trade barriers
and built trans-national transportation routes. Referring to last
winter's energy crisis in Tajikistan and the region, Bobozoda said
the crisis had forced Tajikistan to rethink its priorities and give
more attention to regional cooperation.

DUSHANBE 00000895 003 OF 005

13. (U) Noting that Central Asia was among the world's most energy
rich regions, he called for development of stronger trade relations
between Central Asian countries. He also noted that Afghanistan was
an increasingly important trading partner of Tajikistan, saying that
the U.S.-funded bridge at Nizhniy Pyanj would soon become the
"transportation artery" of the region. Bobozoda said the GOTI
planned to establish a Free Economic Zone near the bridge.

14. (U) Mr. Bobozoda said trade and logistics simplification were
key factors in private sector development. It was clear, the
Minister said, that none of the Central Asian countries could
compete individually in the global economy, and he advocated a
common economic space in Central Asia.

15. (U) AUSTR Mark Mowrey noted that the World Bank gave Central
Asian countries low rankings for ease of cross-border trade, and
urged adoption of a TIFA action plan for the coming year. The Uzbek
representative talked about Central Asia's large resource potential
and Uzbekistan's desire to develop better bilateral and multilateral
relations. The Afghan representative said his country wanted to
reestablish old ties and create new opportunities, and he pointed to
Afghanistan's importance as a land bridge between Central and South

16.(U) The Uzbek representative talked about Central Asia's large
resource potential and Uzbekistan's desire to develop better
bilateral and multilateral relations. The Afghan representative
said his country wanted to reestablish old ties and create new
opportunities, and he pointed to Afghanistan's importance as a land
bridge between Central and South Asia.

Problems of Trade and the Advantages of the "Single-Window":

17. (U) Tapio Naula of USAID described the benefits of a
"Single-Window" policy which allows parties involved in trade and
transport to file the necessary documents at a single entry point in
order to fulfill all import, export, and transit-related regulatory
requirements. Single-window systems in other countries greatly
decreased logistical costs of international trade. Logistical costs
in Central Asian countries were among the highest in the world, he

18. (U) Jonathon Hornbrook of the German Agency for Technical
Cooperation (GTZ) spoke on the practical challenges to trade in
Central Asia. He provided numerous examples of the difficulties of
conducting trade in Central Asia. Nevertheless, he said that there
are signs of progress and that "spring is in the air." Hornbrook
said that a low World Bank Ease of Doing Business rating (170 out of
180) spurred Kazakhstan to take positive action, including a
presidential decree to adopt a single-window approach that in effect
will allow for "one-stop shopping." In Kyrgyzstan a presidential
decree also has led to a single-window process and improvements in
the banking system.

19. (U) Larisa Kislyakova from the Tajik Single-Window Working Group
said that Group members visited a number of countries to see the
system in operation, and would complete work within the month on a
proposal for Tajik Government approval. Rustam Akberdin from the
Kazakh working group described a program for customs reforms that
will include the introduction of a single-window system.

20. (U) In the ensuing discussion of administrative barriers and the
Q20. (U) In the ensuing discussion of administrative barriers and the
single-window approach, the Uzbek representative asked if anyone
really knew how much a single-window system cost to operate.
Uzbekistan had attempted to implement a system for exports but found
the system made exporting more difficult unless simultaneously
implemented at all customs posts. Hornbrook replied by repeating
detailed cost estimates he had given in his presentation -- for
example the estimated 2 million Euros for the system in Kazakhstan
-- and he noted that based on the experience in Senegal, the
development cost can be recouped in two to three years. Mr. Naula
concluded the discussion by saying that Single-Window by itself
would not eliminate trade barriers. For this to happen, procedures
and regulations had to be modernized first, before implementation of

Investment Climate:

21. (U) Andrea Dall'Olio of the World Bank's Central Asia regional
office discussed developments in the investment climate in the past
year. He reviewed the World Bank's Ease of Doing Business report,
and pointed out a few generally positive trends in Central Asia,

DUSHANBE 00000895 004 OF 005

commending Kazakhstan for using a relatively low ranking as impetus
for improvement and noting that Uzbekistan was reforming too. Mr.
Dall'Olio posed a rhetorical question: what do businesses want? He
answered his question by saying that they want simple and
transparent regulations that are cheap and fast. He pointed to a
direct correlation between the Ease of Doing Business report and the
size of the informal sector, saying the harder it was to be a
legitimate business, the more likely a businessman would chose to
operate in the grey market, and the size of the informal economy
correlated negatively with overall employment. Referring to the
problem of corruption, Mr. Dall' Olio said "entrepreneurs cannot
distinguish between official and nonofficial payments." He
advocated for public administration reforms, specifically raising
public sector salaries to combat corruption.

22. (U) Following this presentation, representatives from all
delegations expounded on the virtues of investing in their
countries. Tajikistan touted its hydropower potential, while
Kazakhstan, Uzbekistan and Turkmenistan noted their extensive energy
reserves and their capability to export them to neighboring
countries. No delegation mentioned corruption as a deterrent to

Access to Information:

23. (U) David Featherstone, USAID funded Regional Trade
Liberalization and Customs Project (RTLC) consultant, made a
presentation on the issue of access to import and export regulatory
information. He spelled out a simple formula - access to
information equals trade facilitation equals increased trade
activity, equaling increased economic growth. Mr. Featherstone
described the key functions of laws and regulations based on the
principles of World Customs Organization (WCO) and revised Kyoto
Convention. He then showed some practical examples of import/export
information operations, including the United Kingdom Revenue and
Customs Department and the website of Business link in the United
Kingdom. During a brief discussion following the presentation,
participants generally agreed that countries' trade information
websites needed more up to date information in order to be of use to
businesses. However, the Tajik delegation argued that their website
was indeed up to date.

Discussion of 2007-08 TIFA Action Plan:

24. (U) The concluding session was devoted to discussion and
adoption of an action plan for 2007-08. Under the U.S.-proposed
plan, each country was asked to focus on one or two factors from the
World Bank's Ease of Doing Business Report, identify one or two
factors from the TIFA discussions on which they will focus attention
to facilitate trade, provide quarterly reports on progress towards a
single-window system, and identify a working-level contact for TIFA

25. (SBU) Kazakhstan proposed deletion of the requirement for
quarterly reports on single-window implementation. Uzbekistan
seconded that proposal. Tajik Deputy Minister of Economic
Development and Trade Larisa Kislyakova defended the need for
quarterly reporting, saying that otherwise no one would pay
attention to the action plan. All representatives agreed that apart
from the issue of quarterly reporting, on the whole the action plan
was acceptable as proposed. AUSTR Mowrey asked that all
Qrepresentatives submit their proposed changes to USTR in writing by
the end of June, with the goal of finalizing the action plan by the
end of July. He further suggested that each country work to
eliminate one or two trade barriers during the coming year.

26. (U) In conclusion, AUSTR Mowrey reiterated that the USG viewed
TIFA as a useful tool for improving the trade and investment
environment in Central Asia. Although there were problems, there
were also signs of progress and hope. Private sector involvement
continued to be critical. AUSTR Mowrey announced that USTR would be
happy to host next year's TIFA Council in Washington, D.C.

27. (U) The TIFA council received favorable and extensive press
coverage in Russian language newspapers in Tajikistan. Mr.
Shabdanaliev's presentation from Kyrgyzstan received the most
coverage, perhaps because his presentation clearly outlined the
customs and transportation issues in Central Asia, based on surveys
and analysis.


28. (SBU) Positive elements of this year's TIFA sessions included

DUSHANBE 00000895 005 OF 005

strong participation by the private sector and the Afghan observers,
and the formal establishment of an American Chamber of Commerce in
Tajikistan on the eve of the TIFA meetings. Negative elements
included the failure of Kyrgyzstan to send a delegation from Capitol
(their Ambassador in Dushanbe attended, but did not participate),
and the failure of delegations to engage on issues of investment
climate and trade facilitation. At times delegations flatly denied
assertions made by private sector and NGO participants, for example,
on the absence of up-to-date customs websites. The discussion
sessions were notable for the absence of discussion. This and the
opposition of Uzbekistan and Kazakhstan to quarterly reports on
progress on the TIFA Action Plan called into question their
commitment to the changes and reforms TIFA envisions.

29. (U) USTR and Commerce Department have cleared this cable.


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