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Cablegate: Afghan President's Incoming Senior Economic Advisor

P 051255Z AUG 08
FM AMEMBASSY KABUL
TO SECSTATE WASHDC PRIORITY 5022
INFO DEPT OF TREASURY WASHINGTON DC 0655
AFGHANISTAN COLLECTIVE
NATIONAL SECURITY COUNCIL WASHINGTON DC
CIA WASHINGTON DC
DIA WASHINGTON DC
DEPT OF COMMERCE WASHINGTON DC

UNCLAS KABUL 002066


DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR GERBER AND KLEIN
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
NSC FOR JWOOD
TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, AND MNUGENT
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

E.O. 12958 N/A
TAGS: EAID ECON PREL PHUM ENRG EAIR AF
SUBJECT: Afghan President's Incoming Senior Economic Advisor
Promises Reformist Approach

1. [U] Not for Internet distribution.

2. [SBU] Summary. Officers of the Economic Section met July 28
with Omar Zakhilwal, currently CEO of the Afghanistan Investment
Support Agency, who is slated to become Afghan President Hamid
Karzai's senior economic advisor, to replace Ishaq Nadiri. Like
Nadiri, Zakhilwal has earned a Ph.D. degree in Economics; unlike
Nadiri, he appears to believe in the free-market system, which bodes
well for policy formulation and the Embassy's dealings with him.
Zakhilwal acknowledges the difficulties he will face in moving
forward on a reform agenda in the coming year prior to national
elections, but is optimistic that a rumored change in key ministers
will help unstick a stalled economic agenda. End summary.

3. [U] In late June, reports started coming out of the
always-active Afghanistan rumor mill that Omar Zakhilwal, currently
Chief Executive Officer of the Afghanistan Investment Support Agency
(AISA), would become Afghan President Karzai's new senior economic
advisor, replacing Ishaq Nadiri. AISA - the organization which
licenses all foreign direct investment and all substantial domestic
investment - is well known to the Embassy, and the Economic Section
has met and consulted with Dr. Zakhilwal and his organization often
during the past few years. We used the new EconCouns' arrival at
post to explore Zakhilwal's plans in his new position.

4. [U] Zakhilwal was enthusiastic about his impending confirmation
by the Cabinet as President Hamid Karzai's senior economic advisor.
He portrayed himself as a "strong advocate of the free market" and
of the private sector, noting that he viewed the role of government
as giving "this nascent free-market economy the space to flourish."
He noted - as have we - that several Ministers were not supportive
of the free market, recalling a time last fall when the President
ordered the Attorney General and the Minister of Interior to control
prices of foodstuffs. Because that action is not supported by
Afghan law, it was quickly rolled back, after Zakhilwal showed
Karzai that Afghan inflation was largely imported (and after the
Embassy and the IMF, possibly among others, complained to the Karzai
Administration). However, food stores and warehouses in several
cities were raided and businesses had their stocks impounded before
the government let it be known that it had no legal basis to enforce
price controls.

5. [U] Zakhilwal was also eager to talk to us about some of his
preliminary ideas for how his office would be structured. He
described an ambitious terms of reference he hopes President Karzai
will approve, and said he will also seek the latter's concurrence in
making his office a decision-making body. If Karzai approves, he
would have within his office a policy analysis/policy formulation
unit, as well as a unit whose focus is to "enable" the private
sector.

6. [SBU] Zakhilwal views his future position as being "30-40
percent in the service of the private sector." In his view, his
role at AISA provided him a unique perspective (for a government
official) on impediments to business in Afghanistan. He noted that
while he was not in a position to set economic policy at AISA, he
hopes soon to be able to combat both procedural problems and the
problematic mindsets of those, including ministers, who don't trust
the free market. The procedural problems he mentioned have largely
to do with laws/regulations that need either to be eliminated - such
as the mortgage tax and import duties on manufacturing machinery --
or passed (septel). As an anecdote about mindsets, Zakhilwal
recounted that 5-6 years ago, if his father in Jalalabad (Nangarhar
province of Afghanistan) wanted to call him, he had to travel to
Peshawar (Pakistan) to use a telephone company kiosk. Now, almost
everyone has a cell phone, rates are affordable, and the mobile
telephone companies are adding tens of thousands of new subscribers
monthly. Nevertheless, according to Zakhilwal, the Minister of
Commerce and Industry is among those complaining that the mobile
telephone companies' shareholders are "enriching themselves."

7. [U] EconCouns asked Zakhilwal how he intended to engage with
the Afghan private sector and whether the government could enlist
the help of the private sector in setting policy. Zakhilwal
described debilitating factional rivalries among chambers of
commerce and implied that the private sector here was not yet
competent enough to provide advice. He noted, though, that except
for some financial laws, the government rarely consulted
stakeholders in the lawmaking process.


8. [U] During the coming year, Zakhilwal saw the problems of job
creation and high food prices as those that would most challenge the
government. He said the government had to do a better job about
communicating its achievements. He noted that the Taliban had done
a good job in communicating the perceived failures of the
government, with the result that most Afghans believe that "billions
of dollars have been wasted." He called upon the government - or
himself, in his upcoming role - to publicize its "soft
achievements," such as the improved road system (a once hard 12-hour
trip from Kabul to the border post in Jalalabad now only takes two
hours on a smooth road) and mobile telephony. He seemed optimistic
about his ability to positively affect economic laws and
regulations, and is full of energy and ideas - about which he will
invite Embassy input - for his role as economic advisor.

9. [U] Biographic information: Omar Zakhilwal emigrated to Canada
from a refugee camp in Peshawar, earning a Ph.D. in Economics
(Carleton University, Ottawa, Canada), where he taught for a period
of time. Returned to Afghanistan in 2002. Before becoming AISA
CEO, Zakhilwal served as the Chief Policy Advisor at Afghanistan's
Ministry of Rural Rehabilitation & Development. Zakhilwal has been
a member of the Supreme Council of Da Afghanistan Bank
(Afghanistan's Central Bank) and teaches Economics at Kabul
University. Married with one son born about 2003; his family lives
with him in Kabul. Was previously offered several positions in the
government including Deputy Minister of Commerce and Deputy Minister
of Interior, but declined. Sees himself as an academic; claims no
business interests of his own. Ethnicity: Pashtun from Jalalabad,
Nangarhar province. Speaks excellent English.

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