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Cablegate: Asian Development Bank-Funded Portion of Ring Road Stalled,

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OO RUEHWEB

DE RUEHBUL #3285/01 2881110
ZNR UUUUU ZZH
O 151110Z OCT 09 ZDK
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2188
INFO RUEHBJ/AMEMBASSY BEIJING 4999

RUEHNT/AMEMBASSY TASHKENT 0023
RUEHIL/AMEMBASSY ISLAMABAD 8013

UNCLAS KABUL 003285

SIPDIS
SENSITIVE

DEPT FOR S/SRAP, SCA/FO, SCA/RA, SCA/A

E.O. 12958: N/A
TAGS: ECPS EINV AF
SUBJECT: ASIAN DEVELOPMENT BANK-FUNDED PORTION OF RING ROAD STALLED,
BUT RAILROAD MOVING FORWARD

1. (SBU) Summary: Responding to a recent ultimatum from the Afghan
government, Chinese contractor CREC has minimally resumed work on a
critical section of the ring road in Badghis, funded by the Asian
Development Bank (ADB). The contractor had agreed in July to restart
the project once the GIRoA assigned 500 Afghan police officers to
the site, but did not do so for almost three months. The Chinese
contractor claimed security remained a persistent problem, despite
the police presence. However, a Korean company working at a nearby
location did not encounter any major security issues. On October
13, the Chinese Ambassador to Afghanistan reported to Emboffs that
CREC now claims it has not resumed work because the new
ADB-appointed site engineer is ineffective and has not been at the
site. ADB has confirmed with us that the engineer is absent, but
says there is no reason for him to be there if meaningful work is
not underway. In contrast to the Chinese project, ADB reports it
has genuine security concerns about a ring road section it plans to
run through Badghis' Murghab Valley. The Army Corps of Engineers
(ACE) is investigating whether it can take on this project. Work
will start soon on an ADB-funded railroad from Hairaton to
Mazar-i-Sharif, and the project should be finished in the next 14 to
21 months. End summary.

RING ROAD PROBLEMS PERSIST
--------------------------

2. (SBU) China Railway Engineering Corporation (CREC) recently
resumed minimal work on the Qaisar - Bala Murghab portion of the
ring road, thus ending a three-month construction halt, according to
ADB Country Director Craig Steffensen. This resumption was
undoubtedly prompted by a letter from Finance Minister Omar
Zakhilwal to CREC demanding that work resume by October 10 or the
Afghan Government would terminate the contract. Zakhilwal said if
the contract is terminated, the Afghan Government and ADB would
blacklist CREC from any future contracting opportunities. CREC
would also have to pay a penalty of $3.8 to $4 million and forfeit
its equipment.

3. (SBU) Earlier in July, Finance Minister Omar Zakhilwal offered to
provide CREC with 500 police at ADB expense to guard the site,
following the kidnapping of CREC employees in the first quarter of
2009. CREC assured Minister Zakhilwal it would resume work with
this additional security. ABD paid the police officers $50,000 per
week to do nothing but guard equipment for most of the past three
months. On October 10, however, ADB representatives reported that
CREC had restarted a minimal amount of the work, but ADB could not
verify to what extent construction had been reinitiated. While
Steffensen admitted the security situation at the site is not ideal,
he noted that a Korean contractor a few kilometers down the road has
incurred just a few incidents with far less protection than the CREC
project.

4. (SBU) In explaining the three-month hiatus, Steffensen said the
Chinese Ambassador to Afghanistan Zheng Qingdian told him that the
Chinese Government had instructed all its Ambassadors to avoid
security incidents that would mar the ongoing celebrations of the
PRC's 60th anniversary. But on October 13, Zheng reported to
Emboffs that CREC now claims it has not resumed work because the new
ADB-appointed site engineer, who is from the UN Office of Project
Services (UNOPS) is ineffective. According to Zheng, CREC says the
engineer left the site after only two hours on his first day, saying
he needed to study the situation. He has not returned since, and he
is needed to serve as a liaison between CREC and the Afghan crew
doing the work. ADB has confirmed with us that the engineer is
absent, but says there is no reason for him to be there if
meaningful work is not underway.

MEANWHILE, HERE'S THE REAL SECURITY PROBLEM
-------------------------------------------

5. (SBU) The Qaisar - Bala Murghab is one of the few remaining
portions of the ring road under construction. Another section
through the Murghab valley in Badghis province may be even more
challenging, Steffensen said. The local Spanish-led PRT warned him
the road will be a terrorist target. ADB has asked ISAF, the ANA
and PRT troops for protection. The project has three components:
road building, security and a social component that includes school
and mosque renovation, job creation and anything else needed to gain
the local community's support. He said the community most desires
electricity, but a transmission line would cost $40 to $50 million
and the Ministry of Energy and Water (MEW) prioritizes
more-populated areas. While the Spanish Government is helping
develop the provincial capital of Qual-e Naw, Steffensen believes
aid agencies have generally overlooked the province. He asked if
the Army Corps of Engineers (ACE) could build the road. Ambassador
Wayne said he would inquire, noting that current priorities focus on
the South and East of Afghanistan. (Comment: ACE is now looking
into whether they can build the road. End Comment.)


RAIL PROJECT STEAMS AHEAD
-------------------------

6. (SBU) In contrast to the ring road, ADB's northern railroad
project is going well. On September 30, ADB's board approved an
80-kilometer rail line from Hairaton, near the Uzbek border, to
Mazar-i-Sharif. The contract calls for completion by June 2011, but
Steffensen said contractor Uzbek Railways had assured the ADB it
will complete work by December 2010. ADB views this project as the
first phase of a rail corridor linking Mazar-e-Sharif, Herat,
Jalalabad and border points with Pakistan. Steffensen noted said
state-owned Uzbek Railways is shrewd to build the first phase,
ensuring the line would be Russian gauge, ensuring smooth
connections with the Soviet- built rail systems of Afghanistan's
northern neighbors.

7. (SBU) Security costs for the rail project should total about $10
to $16 million out of a total $170 million budget. Steffensen added
that RC-North commanders support the project.

USING THE AFGHANISTAN RECONSTRUCTION FUND?
-----------------------------------------

8. (SBU) With $900 million worth of projects underway, ADB is the
second-largest development agency in Afghanistan (behind USAID).
Steffensen said three employees have been killed, and 19 kidnapped,
in the past year, and that he has a hard time attracting skilled
expats, particularly to sites outside of Kabul.

9. (SBU) Steffensen suggested that the USG consider co-financing ADB
projects using Afghan Reconstruction Trust Fund (ARTF) money. He
said most donors do not currently use this mechanism, but that it
would help support larger projects. Although ARTF rules prohibit
prioritizing funds for specific areas, Steffensen, an ARTF
management committee member, indicated that such projects could be
earmarked in a more general way. Ambassador Wayne agreed this could
be worth exploring.

EIKENBERRY

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