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Cablegate: Acting Commerce Minister Surveys Trade Policy Priorities

VZCZCXRO0517
RR RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #0360/01 0281543
ZNR UUUUU ZZH
R 281543Z JAN 10
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 5156
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 02 KABUL 000360

SIPDIS

DEPT FOR SCA/RA, SCA/A, EEB
DEPT PASS USTR FOR LILIENFELD AND KLEIN
DEPT PASS TDA FOR STEIN AND GREENIP
NSC FOR JWOOD
TREASURY FOR ABAUKOL, BDAHL, AND MNUGENT
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH
USAID/W FOR: ASIA/SCA: CAROLINE BREARLEY; AMI MORGAN

E.O. 12958: N/A
TAGS: ETRD EAID PGOV EINV EIND AF
SUBJECT: ACTING COMMERCE MINISTER SURVEYS TRADE POLICY PRIORITIES

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Summary:
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1. (U) On January 26, USAID's Economic Growth Team and the Economic
Counselor met with newly-designated Acting Minister of Commerce
Ghulam Mohammed Aylaki to assess his support for trade
liberalization and introduce the USG's new Trade and Accession
Facilitation for Afghanistan (TAFA) project designed during former
Commerce Minister Shahrani's tenure. Acting Minister Aylaki
welcomed and strongly supported a forward-leaning trade agenda,
while highlighting his top four priorities at the Ministry: (1) the
Afghanistan-Pakistan Transit Trade Agreement (APTTA), (2) WTO
accession , (3) capacity building within the ministry, and (4) a
vision for more comprehensive support of export promotion. END
SUMMARY

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FIRST PRIORITY: CONCLUDE THE AFGHANISTAN-PAKISTAN TRANSIT TRADE
AGREEMENT (APTTA)
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2. (U) Acting Minister Aylaki said APTTA was his most immediate
priority. After the Afghan government obtains national treatment
for Afghan trucks at the India-Pakistan Wagah border crossing, his
country would have much improved access to India's near
400-million-strong middle class market. He expressed appreciation
for guidance that USAID's TAFA Advisor provided to Afghanistan's
negotiating team during the fifth round of talks in Islamabad in
December 2009. Advice centered on ensuring that concessions made or
solutions proposed would be consistent with international standards
and practices, in line with WTO principles. The Acting Minister
noted this was very helpful and requested such assistance continue.

3. (SBU) Aylaki expressed appreciation for USG efforts to maintain
high-level political momentum to conclude APTTA. Acknowledging the
need for both sides to show flexibility, particularly on re-export
issues, Aylaki added that he was also trying to establish a rapport
with Pakistani Commerce Minister Fahim to help close the deal when
the time was right.

4. (SBU) Aylaki confirmed that the Afghan business delegation led
by Afghan Chamber of Commerce and Industry Vice Chair Alkozay had
departed for Pakistan on January 25, well ahead of February 2-5
re-export and customs talks scheduled in Karachi. On the way to
Karachi, Alkozay stopped in Peshawar to explore the possibility of
forming a joint chamber of commerce and to review cross-border trade
issues.

5. (SBU) According to Pakistani press reports, ACCI Vice Chair
Alkozay did find the Peshawri Chamber leadership supportive of a
bilateral free-trade arrangement that would lower or eliminate
tariffs on Pakistani-origin items such as cement, ghee, and fruit in
return for similar tariff cuts on Afghan-origin products. However,
the Peshawri Chamber leadership reportedly underscored to Alkozay
long-standing Pakistani business concerns about re-exports.

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SECOND PRIORITY: ACCELERATE WTO
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6. (U) Despite Afghanistan's limited progress toward WTO accession
since it became an Observer Member in 2004, Acting Minister Aylaki
noted recent advances and stated that WTO accession is a top
priority. He observed that former Minister Shahrani submitted
Afghanistan's Memorandum of Foreign Trade Regime (MFTR) to the WTO
in March 2009. The MFTR is a comprehensive document that presents a
snapshot of a country's trading environment, key statistics and
composition of the economy - the first step toward WTO accession.
In May 2009, Shahrani established the WTO Unit, which now consists
of two highly-qualified individuals, but lacks sufficient
institutional support and authority to effectively coordinate with
other ministries. Afghanistan also lacks a full-time trade
representative stationed in Geneva, Switzerland dedicated to
follow-up on the WTO accession process and keep Kabul informed about
WTO activities.

7. (U) Afghanistan is currently responding to MFTR questions
submitted by WTO member countries, and will need to convene an
effective inter-ministerial committee (IMC) to accelerate the work.
USG assistance will support the Ministry in organizing the IMC,
advise the committee on responses to the MFTR by March, and support
committee members at the first WTO Working Party meeting slated for
late June 2010.

KABUL 00000360 002 OF 002

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THIRD PRIORITY: CAPACITY BUILDING FOR GENERATIONS, OLD AND NEW
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8. (U) Aylaki highlighted the importance of training and mentoring,
asking for help in strengthening the ministry's capabilities. USAID
expressed willingness to train and advise staff but stressed that
the Ministry appoint committed counterparts. The USG has had an
excellent working relationship with the Director General of the WTO
Unit, Mozammil Shinwari, who was appointed under Ex-Minister
Shahrani. However, more trained personnel will be required to
support key ministerial initiatives. Aylaki acknowledged former
Minister Shahrani's effort to bring 30 young Afghan graduates of
Indian universities into the Ministry, but noted "a clash of
generations" had ensued as the more senior Civil Servants feared
they would lose their jobs. Alayki seemed constructive about
engaging with his staff in overcoming this generational divide --
and highlighted the need to offer learning opportunities for both
old and new generations within the ministry. USAID requested that
both the Ministry and TAFA advisors monitor the situation to ensure
both achieve a good return on resources invested in this effort.

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FOURTH PRIORITY: ADDRESSING PRIVATE SECTOR NEEDS
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9. (U) In the Acting Minister's meetings with private sector
representatives -- including the handicrafts, fresh fruits, and
carpet sectors (with carpets employing about 2.5 million Afghans) --
these groups requested help on overcoming trade restrictions and
increasing support for export promotion and market access.
Entrepreneurs noted that participation in fairs abroad was helpful
but not sufficient in solving trade- and marketing-related problems.
The USG's trade and Small and Medium Enterprise (SME) development
programs are initiating work together with the Export Promotion
Agency of Afghanistan (EPAA) to address this issue more
comprehensively.

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COMMENT
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10. (SBU) President Karzai's first nominee for Commerce Minister in
December 2009, Aylaki failed to garner Parliament's support; a
second nominee withdrew his candidacy, and a third nomination will
likely be presented soon. Parliament is scheduled to return from
recess on February 21 and will reportedly not approve the
semi-annual budget until the remaining unfilled ministerial posts
are submitted. Should a new Minister be confirmed, Aylaki is
expected to remain in the ministry in some capacity -- as a Senior
Policy Advisor or Deputy Minister. Although approaching 70 years of
age, with limited English and educated in the era when Command
economies ruled, Aylaki was refreshingly receptive to a proactive
trade agenda and USG technical assistance, and could thus prove to
be a helpful partner in advancing Afghanistan's trade agenda.

RICCIARDONE

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