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C O N F I D E N T I A L KABUL 003714

C O R R E C T E D COPY (TEXT)

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DEPT FOR S/SRAP AND SCA/A

E.O. 12958: DECL: 11/18/2019
TAGS: ECON PGOV PREL EAID AF
SUBJECT: (C) AFGHAN COMMERCE MINISTER DISCUSSES REFORM AGENDA

Classified by Coordinating Director for Development and Economic
Affairs Ambassador E. Anthony Wayne for reasons 1.4 (b) and (d).

¶1. (C//NF) SUMMARY: Reform-minded Afghan Commerce Minister Shahrani,
who hopes for U.S. support to keep a ministerial job, argued on
November 15 that President Karzai is under heavy pressure from Afghan
politicians to accept less than ideal ministers and urged that the US
and other donors talk not only to Karzai but also to those
politicians to stress the importance of approving a good slate.
Sharani also shared his view of reforms needed in the new government,
insights into fighting corruption, views on the importance of getting
sub-national governance right, and the need for the government and
donors to agree on specific performance benchmarks tied to aid
delivery.  End Summary.

¶2. (C//NF) Afghan Commerce Minister Shahrani told Coordinating
Director for Development and Economic Affairs Wayne on November 15
that President Karzai is under great pressure from political leaders
to accept a number of ministerial candidates whose technical skills
are lacking.  He specifically cited pressure from ex-warlord General
Dostum, from ex-jihadist Professor Sayyaf and Hazara leader Mohaqqeq.
Shahrani, who wants U.S. support to stay on in the cabinet,
expressed concern that Karzai would not resist the pressure for
political payback on his own, and urged the U.S. and other donors to
communicate directly with these political groupings to indicate that
if a weak or corrupt set of ministers was put in place then the U.S.
and others would be forced to withdraw their support. He argued that
these political leaders are only thinking of dividing up the spoils
rather than the quality of government needed to tackle Afghanistan's
problems.  Shahrani repeatedly argued that the next five years are
essential for Afghanistan and the first months of the new Karzai
administration are key to getting the right reforms in place to
really bring about positive change in the years ahead.  Afghanistan
needs the U.S. and other donors to have a chance for real progress,
he said.  He urged that the U.S. speak frankly in private to Karzai
as well as key Afghan political leaders.

¶3. (SBU) Shahrani argued that it is essential that the U.S. and other
international donors get as many specific commitments as possible
from Karzai, in the inaugural speech if possible and subsequently
then in some sort of joint document between donors and Afghanistan.
A key step is to press for the President to be clear on basic
commitments in his inaugural speech, especially about good governance
and fighting corruption.  Shahrani said he hoped the President would
approve up to ten key areas for reform in the first year of his
administration. He and Finance Minister Zakhilwal agree, according to
Sharani, that the reform areas should be in areas where the
population will see a difference in delivery of services.

¶4. (C//NF) Shahrani underscored the need for very good ministerial
and gubernatorial appointments and the concomitant reform of
government organizations.  He said that he and other reform-minded
ministers still believe they have Karzai's support to name lead
ministers for five key clusters: 1) finance, economy and commerce; 2)
agriculture and rural Development; 3) human development (education
and health); 4) security; and 5) justice/rule of law. Cleaning up the
last sector will be essential, he argued, especially given the degree
of corruption currently in the Attorney General's ministry and the
judicial system.  If this does not happen, it will be very hard to
address corruption in the rest of the government.  Similarly, the
executive office of the President needs serious reorganization so the
President gets a good and balanced flow of information and advice and
so that ministerial coordination and cabinet decision-making can be
significantly enhanced, Sharani said. (Note: This is a complaint we
have heard from a wide variety of sources, from donor nations to
Palace insiders.  End note.)

¶5. (C//NF) Turning to corruption more broadly, Shahrani argued that
State-owned enterprises need to be turned into independent commercial
entities rapidly (on the way to privatization), as they are great
sources of corruption.  Shahrani also singled out the Transportation
Ministry as a hot bed of corruption, especially its airport
operations and its "private enterprise group."  Finance Minister
Zakhilwal had recently broken up a corruption ring at Kabul Airport,
but the private sector group is an even bigger problem.  This unit
includes people who collect fees on trucks traveling in Afghanistan.
Estimates are that about $200 million are collected yearly but only
$30 million are turned over to the government, he said.  Individuals
pay up to $250,000 for the post heading this office in Herat, for
example, and end up owning beautiful mansions as well as making
lucrative political donations.  This ministry should be a top target
for cleaning up in the new regime.

¶6. (SBU) In his November 15 conversation with Ambassador Wayne,
Shahrani said, 14 of Afghanistan's governors have been identified by
Local Governance minister Popal as bad performers and/or corrupt.
These 14 should be fired, and the new government should implement
procedures for selecting governors based on merit and for reviewing
performance on a yearly basis.  Such a performance review process
should be put in place for all top officials. There must also be a
greater focus on improving service delivery at the provincial level,
he argued.  Governors should be given more substantial operational
budgets as well as placed under more rigorous auditing controls.  The
big municipalities also need careful attention, first in good mayoral
appointments and then in greatly improved management, tax collection
and service delivery.

¶7. (C//NF) Turning to international assistance, Shahrani argued that
donors should tie additional aid to clear benchmarks and timelines.
This should be publically announced as part of a broader agreement,
and donors should be tough in demanding agreed performance benchmarks
before distributing additional assistance.  Such an agreement should
call for some overarching commitments, with each ministry receiving
aid committed to achieving its own set of benchmarks in consultations
with donors.  There should be focus on improving delivery of services
to the population and mechanisms should be put in place to measure
success.  Shahrani suggested that the action plans for ministries
should have three to four year time horizons.

¶8. (C//NF) Comment: Minister Shahrani is working closely with the
Ministers of Finance, Agriculture, Education and local government to
encourage bold reform moves by the new Karzai administration.  While
some of the specific ideas he shared may be his own, they are
consistent with what other reform-minded ministers have been saying
and urging. Shahrani clearly hopes for U.S. support in keeping a
cabinet position.  He has been a good partner on a range of
commercial and economic issues and an energetic proponent of reaching
a trade agreement with Pakistan.  He has also gone out of his way to
help on bilateral issues such as finalizing arrangements for U.S.
Consulate leases.

EIKENBERRY