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Cablegate: Afghanistan-Pakistan Joint Economic Commission Meeting,

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PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #3086/01 3351335
ZNR UUUUU ZZH
P 301335Z NOV 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 6258
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0692
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 003086

DEPT FOR SCA/FO, SCA/RA, AND SCA/A
DEPT PASS AID/ANE
DEPT PASS USTR FOR DEANGELIS AND DELANEY
DEPT PASS OPIC FOR ZAHNISER
DEPT PASS TDA FOR STEIN AND GREENIP
USOECD FOR ENERGY ATTACHE
CENTCOM FOR CSTC-A
NSC FOR JWOOD
TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, AND MNUGENT
OSD FOR SHIVERS
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH

SENSITIVE

SIPDIS

E.O. 12958 N/A
TAGS: ECON ETRD ETRA PREL ECIN EAID AF PK
SUBJECT: AFGHANISTAN-PAKISTAN JOINT ECONOMIC COMMISSION MEETING,
NOVEMBER 25-26, 2008

1. (SBU) Summary. The Joint Economic Commission (JEC) focused on
the many trade, trucking, and transit issues that bedevil the
Pak-Afghan bilateral economic relationship. The two sides agreed to
set up three new working groups to deal with these irritants. One
aims to negotiate a new Afghanistan-Pakistan Transit Agreement and
may meet as soon as January. The Afghans hope a new treaty will
resolve most of their grievances. The second working group will
take up Customs issues. The third, a Joint Monitoring and
Evaluation Committee, will report quarterly to the JEC on
implementation of JEC decisions. A fourth joint committee will
prepare a joint proposal on funding of Reconstruction Opportunity
Zones, which both sides strongly endorsed. The Finance Ministry
official who briefed us was pleased that the JEC took up the
critical trade and transit issues and that the Afghan private sector
played a helpful role. At the same time he lamented that the
Afghans have been raising most of their complaints for years. The
GOP, he said, promises to look into them but nothing ever changes.
Our contact requested USG assistance to press the GOP to take action
on these long-standing impediments to smoother regional trade. End
Summary

2. (SBU) Finance Ministry Advisor for Regional Economic Cooperation
Saifullah Abid gave EconCouns a readout on the JEC, which met
November 25-26 in Kabul. Appropriately, the meeting focused on the
many trade and transit issues that bedevil the bilateral economic
relationship. Afghan businesses, represented by the Afghanistan
Chamber of Commerce and Industries (ACCI), played an active role in
the meeting and delivered a litany of complaints about the treatment
of Afghan shippers and transit goods by Pakistani authorities. The
latter, in turn, had their own gripes about barriers to smooth
movement of Pakistani goods through Afghanistan to Central Asia.

3. (SBU) Abid said Afghan officials pressed hard for negotiation of
a new Afghanistan-Pakistan Transit Agreement (APTA) to replace the
Afghan Transit Trade Agreement (ATTA) signed in 1965. The GIRoA
argued that most of the issues raised by both sides would be
resolved by a new agreement. According to the JEC Minutes, the
GIRoA formally delivered a draft text of a new APTA to the Pakistani
Embassy in Kabul on November 18. The two sides agreed to form a
Joint Working Group (JWG) to negotiate the APTA. The Minutes say
this bilateral group is to meet on the margins of the Regional
Economic Cooperation Conference (RECC), planned for January 2009 in
Islamabad. However, the Foreign Ministry official responsible for
Afghan preparation for the RECC told us November 30 that the RECC
was being postponed until February or March because of security
concerns in Islamabad. The Ministry of Commerce and Industries
(MOCI) will have the GIRoA lead on this JWG.

4. (SBU) Afghan officials also complained about the lack of
reciprocity in trucking services: Pakistani truckers can deliver
goods to Afghan destinations and transit Afghanistan to third
countries, but Afghan truckers are not allowed to enter Pakistan
(beyond Peshawar) and are required to hire the military-owned
National Logistics Cell (NLC) to move Afghan transit goods. NLC's
prices were excessive and its poor service led to long delays for
Afghan transit goods at Karachi port. Pakistani officials said
there were security and revenue-leakage issues with Afghan trucks.
The Minutes state that the two sides agreed to review these trucking
issues in the JWG on APTA and resolve them in a new treaty.

5. (SBU) Besides pressing for full rights for Afghan trucks, the
GIRoA and ACCI proposed establishing a joint transport company
between the Afghan and Pakistani private sectors to meet both sides'
transit trade needs. The Minutes state that this issue will be
considered "by the Joint Pak-Afghan Chamber of Commerce within the
APTA framework." (Comment: Elsewhere the Minutes note that the

KABUL 00003086 002 OF 002


Pakistan-Afghanistan Chamber of Commerce and Industry has only met
once.)

6. (SBU) The Afghan side also raised a number of Customs issues,
some relating to Pakistani fees it contends are illegal under the
existing ATTA. GOP officials cited the reduction to just two
products - cigarettes and spare parts - on the Negative List of
goods that may not transit Pakistan to Afghanistan. The GIRoA
pressed for elimination of these two. The two sides agreed to form
a Joint Customs Committee to deal with these issues. The Finance
Ministry will lead the Afghan side in this working group.

7. (SBU) For their part, GOP officials complained, among other
things, about constraints on Pakistani transit trade through
Afghanistan to Central Asia, including shippers having to register
with three ministries, levies at various checkpoints, and the
requirement to post a guarantee of 110 percent of the value of the
cargo, returnable when exiting Afghanistan. GIRoA said it is
working to remove the guarantee within six months and proposed that
other issues be covered in the context of a new APTA.

8. (SBU) The two sides agreed to form, within one month, a Joint
Monitoring and Evaluation Committee charged with tracking
implementation of JEC decisions. This working group, led by MOCI on
the Afghan side, is to report quarterly to JEC.

9. (SBU) Abid said both sides expressed support for Reconstruction
Opportunity Zones and hoped the USG would soon be able to launch the
program. They agreed to "jointly encourage the donors to fund [the]
initiative and ... to form a Joint Committee to prepare a joint
proposal for ROZs funding within the next three months." (Comment:
Regional recognition of the value of the ROZ program is, of course,
welcome, but despite our efforts, the misunderstanding persists that
ROZs are a donor-funded aid project, rather than a business-led
trade preference scheme. We will keep trying to correct it.)

10. (SBU) The two sides also discussed Pakistani reconstruction
assistance to Afghanistan. Abid said GOP officials undertook to
complete ongoing projects and to consider, once Pakistan's financial
situation improves, the GIRoA wish-list of new projects. They also
discussed connecting the two countries' fiber optic networks, which
would require the Pakistani side to install only a 15-km section
between Peshawar and Torkham. Abid said the GOP agreed to consider
this and also suggested that the GIRoA speak to Etisalat, the UAE
private investor in the Pakistani phone company (PTCL). The two
sides did not discuss preparations for the RECC.

11. (SBU) Overall, Abid had mixed views on the results of the JEC.
He said the GIRoA was well prepared and put all its issues on the
table, Afghan business played a helpful role, the exchange was frank
and atmospherics good. At the same time, he was disappointed that
Pakistani delegation leader Shaukat Tarin only participated in the
signing of the Minutes (he held bilateral meetings with President
Karzai and three ministers). As a result, Finance Minister Ahady
only attended the opening and signing sessions, and most of the
meeting was chaired at sub-cabinet level. Creation of the three
working groups held potential, but Abid lamented that the Afghans
have been raising most of their complaints for years. The GOP, he
said, promises to look into them but nothing ever happens. Abid
specifically requested USG assistance to press the GOP to take
action on these long-standing impediments to smoother regional
trade, which he also noted affect Coalition military efforts in
Afghanistan. EconCouns undertook to relay the request.
DELL

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