Cablegate: Kunar's Timber Industry and Smuggling: Solutions Await A

DE RUEHBUL #3792/01 3320640
R 280640Z NOV 09



E.O. 12958 N/A
SUBJECT: Kunar's Timber Industry and Smuggling: Solutions Await a
New Cabinet

REF: A. Kabul 2438
B. Kabul 3479

1. (SBU) Summary: With some of the most dangerous pockets of
insurgency in Afghanistan, Kunar province sits on the country's
eastern border with Pakistan's Federally Administered Tribal Areas
(FATA). Rampant timber smuggling has long undermined faith in the
government and supported local insurgents, while deforestation has
seriously damaged watersheds and agricultural production. The
Cabinet's September 28 decision to allow sales of stockpiled
impounded timber will permit timber merchants to make licit money
and should decrease fire hazards in population centers. However,
this decision has yet to be implemented, with timber being
increasingly smuggled out of lumber yards at night. Just as
importantly, the National Assembly has yet to adopt a long-awaited
Forest Law that will permit controlled harvests and donor
participation in the development of a value-added wood-processing
industry over the longer term. We are encouraging national and
provincial leaders to move forward on these issues, but the Karzai
government's transition to a new cabinet is likely to slow down this
process at least another 1-2 months. End Summary.

Smuggling and Deforestation
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2. (SBU) By Presidential decree, harvesting timber for export has
been illegal in Afghanistan since 2004. This ban, however, has not
effectively protected the environment and has indirectly fostered a
widespread smuggling network, rapidly depleting forests in Kunar and
Nuristan provinces. Deforestation decreases agricultural
productivity and water availability, depriving the region of
potential jobs. Smuggling encourages corruption, undermines faith
in the national and regional government, and supports the
insurgency. Kunar Governor Sayed Fazlullah Wahidi brought
ministerial attention to these issues when he hosted a timber shura
in July (ref A). The lack of a legal framework for the logging
industry puts Afghanistan in a lose-lose situation: timber and its
associated enterprises and jobs move out of the country, while the
environment and economic prospects are degraded.

The Cabinet Decision to Allow Stockpile Sales
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3. (SBU) A September 28 cabinet decision to allow the sale of
stockpiled illegally-cut timber represents a positive step that
timber owners have long anticipated (ref B). The stockpiles
represent a depreciating asset and fire hazard. In Kunar's capital
Asadabad, stockpiles are located in the middle of residential
neighborhoods, where a fire could have catastrophic consequences.
Sales have not yet begun, however, pending cabinet approval of
procedures and disposition of a high-level request for a stronger
anti-corruption focus. As a result, frustrated merchants and
power-brokers are increasingly smuggling timber out of the lumber
yards at night. We are urging the Afghan government to announce and
carry out their plan for licit sales as soon as possible.

4. (SBU) The draft procedures explicitly call for an "exact
account" of the amount of stockpiles to be sold. During a November
1 meeting, Econoffs asked Finance Ministry Chief of Staff Safi if
this amounted to an upper-limit "cap" on sales, as previously
recommended by Kunar Governor Wahidi to prevent newly cut timber
from being added to stockpiles. Although unwilling to commit to a
sales cap, Safi said the Afghan government estimates about 5.47
million cubic feet of confiscated wood have been stockpiled and no
more than this amount should be sold. (Note: When pressed, Mr.
Safi said sale quantities would be announced and tracked,
contradicting his earlier statement on October 6 that sale
quantities would not be limited. While the possibility of a cap is
a positive development, we are not confident it will be effectively
implemented. End note.)

5. (SBU) The draft procedures also require weekly and monthly
reporting of tax revenues from sales to Customs and the Ministry of
Finance, with the resulting sales tax revenue to be spent primarily
on infrastructure rehabilitation projects, pending Ministry of
Finance and Presidential approval. Safi said some of the money will
be directed to the originating timber-producing provinces, but
emphasized such an arrangement could not be made public, since tax
revenues officially go to the central government, not the provinces.
PRT Kunar reports Governor Wahidi was confident, following his
discussions with the Ministry of Finance, that fifty percent of tax
revenue would be returned to Kunar. (Note: Wahidi's recent
avoidance of the topic with PRT officers may indicate this proposal
is shifting. End Note)

New Forest Law Offers Hope for Engagement
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6. (U) A new Forest Law, currently in Parliament, is expected to be
passed in 2010. Once adopted, the law will provide a statutory

KABUL 00003792 002 OF 003

basis for international donors to engage with the Afghan Government
on the creation of a sustainable cutting, reforestation, and
value-added business cycle benefiting the country's timber-producing
regions. We are working closely with parliamentary leaders to
encourage its passage. In the interim, however, PRT Kunar is
investigating options for an outreach campaign on conservation and
reforestation, possibly through local mullahs, who are widely
respected sources of information in Kunar. (Note: Security issues
will restrict activities and entry into some areas. End note.)

7. (U) Afghan-leadership and community ownership are critical
components of a long-term sustainable forestry plan. Otherwise,
economic development could rapidly accelerate environmental
degradation. Local government capacity-building and support for
civil society are also essential, offering opportunities for
international donor support. Local timber agribusiness development
also call for tree nurseries for reforestation and wood-lot
development, mobile sawmills, value-added furniture manufacture,
increased artisanal work, and improved quality control to take
advantage of the U.S. "Afghan First" policy promoting local
procurement. Additional value-added production in Afghanistan will
provide greater employment opportunities and improve security.
Greater local value added through a stronger wood-processing
industry will also prompt a sense of ownership in the province's
timber resources, thereby strengthening the measures needed to
safeguard and sustain these resources.

Water and Irrigation
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8. (U) Kunar is a traditional agriculture area where changes in
altitude provide a variety of growing zones suitable for grapes,
wheat, fruit and nut trees. Locally-based NGOs and PRT elements
recommend increased support for irrigation infrastructure, such as
USAID's work on the 27 kilometer Salar Canal, the longest in Kunar,
which will irrigate 3,500 hectares and benefit 8,500 families. The
newly-arrived California National Guard Agribusiness Development
Team (ADT) is building on these efforts and reviewing additional
means to improve water access. A Kunar local leader told PRT and
Emboffs on November 12 that potable water is one of his community's
top three priority projects: the Embassy's new Sustainable Water
Supply and Sanitation project (SWSS, providing $52 million
nationwide over three years to address drinking water issues) can be
deployed to address these local needs.

Electricity: Key to Economic Development
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9. (U) Improved electricity infrastructure will benefit almost any
business, and greater job growth will improve security by providing
fighting-aged males with jobs. Woodlot and furniture factory owners
in Asadabad consider lack of reliable power the main hindrance to
expansion of their businesses. Local representatives of the
Ministry of Rural Rehabilitation and Development (MRRD) also
described a pilot program of matching grants supporting a candy
factory, cheese factory, bakery, and fish farm. ADT representatives
are investigating options for a citrus processing factory and other
value-added food processing, building on Roots for Peace, Madera,
and other NGO donations of fruit trees in Kunar.

10. (U) Kunar's plentiful rivers have proven its best energy
source. (Solar power is only suited for small-scale village
projects such as street lights.) Asadabad has a community
mini-hydro plant with the potential for 700KW output and a
rarely-used 1MW diesel generator, although transmission losses and
grid issues limit power available to the city. Owners of
woodworking shops consistently use private generators instead of
city power, calling city power "not strong enough" or reliable.
Over the past few years, there has been significant PRT and Afghan
government investment in mini- and micro- hydro throughout Kunar,
but lack of maintenance training resulted in degraded and unreliable
systems. In Asadabad, a recently-approved engineering study of the
mini-hydro plant funded by the PRT will analyze generation,
distribution, and sustainability of the plant and grid. PRT Kunar
is also investigating the system's inefficiencies and may be able to
request technical assessment and rehabilitation assistance through
the Embassy's new Afghan Clean Energy Program (ACEP, $83 million
nationwide over four years).

Roads and Border Crossings
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11. (SBU) CERP funding is improving access to the Nawah Pass with a
13km paved road due for completion by March 2010, allowing an easy
two-hour drive to Peshawar in Pakistan. We are exploring with the
Afghan government the possibility of opening and staffing the
crossing by that time to ensure it does not develop into a new
smuggling route. People and goods currently only cross on foot and
reload to local vehicles on the other side. Over the longer term,
the official opening of this crossing with the government of

KABUL 00003792 003 OF 003

Pakistan could bolster the local licit economy by providing an
alternative to the Torkham Gate crossing to Pakistan. A better
connection to Pakistan will encourage timber firms to export their
products. However, the draft Forest Law will need to be amended to
legalize exports of raw timber. This anti-export strategy would
indirectly foster greater timber smuggling into Pakistan, in the
absence of adequate border crossing forces to interdict illicit
trade. Afghan authorities are aiming to rebuild wood-working
industrial capacity in the region to keep jobs in Afghanistan and
put it on a competitive footing with the more advanced Pakistani

- - - - -

12. (SBU) Kunar's Chapa Dara district and the Pech River Valley
also produce gemstones, including tourmaline and emeralds. Chapa
Dara is one of the province's few districts to maintain most of its
forest cover, primarily because the local communities have focused
on gem smuggling instead of timber smuggling. Gemstones are
currently smuggled to Pakistan, where skilled cutting increases the
value of the raw stones more than tenfold. An Embassy project
through USAID to reinforce Afghanistan's "mines to market" value
chain for gemstones through training (on-site mining safety, cutting
and testing), equipment supply, public-private partnerships, market
linkages, and industry infrastructure strengthening could be useful
if implemented in Kunar. A new gemstone market opened in Jalalabad,
the capital of neighboring Nangarhar province on November 14, and
there may be opportunities to provide training associated with this
private market, increasing employment opportunities and local

- - - -

13. (SBU) We are working closely with local and provincial leaders,
who agree that accelerating Kunar's economic development constitutes
the most effective way to improve security and reduce the appeal of
the insurgency. This effort will call for significant investment in
infrastructure and a sustainable use plan for Afghanistan's forests,
thereby protecting its watersheds, spurring job growth, and
ultimately making the region safe enough for Afghan security forces
to take responsibility for the area.

14. (SBU) Over the short term, we continue to push for the rapid
implementation of licit timber sales. Nonetheless, we anticipate
that the Karzai government's transition to a new cabinet is likely
to slow down this process at least another 1-2 months. In addition,
we are encouraging the Parliament's passage of the vitally needed
Forest Law to legalize new timber cutting. Parliamentarians
recognize the need for action, and we are cautiously optimistic that
the law will be passed in 2010 following the upcoming winter


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