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Viewing cable 09KABUL790, AMBASSADOR'S CALL ON NEW MINISTER OF TRANSPORT
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09KABUL790 | 2009-03-31 03:30 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Kabul |
VZCZCXRO4472
OO RUEHDBU RUEHPW
DE RUEHBUL #0790/01 0900330
ZNR UUUUU ZZH
O 310330Z MAR 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8025
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC PRIORITY 0134
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0768
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHNO/USMISSION USNATO BRUSSELS BE
RHMCSUU/FAA NATIONAL HQ WASHINGTON DC
UNCLAS SECTION 01 OF 02 KABUL 000790
DEPT FOR SRAP, SCA/FO, SCA/RA, EEB/TRA/OTP AND SCA/A
DEPT PASS AID/ANE
DOT PASS FAA FOR RAY SMITH
TREASURY PASS MHIRSON
NSC FOR JWOOD
SENSITIVE
SIPDIS
E.O. 12958 N/A
TAGS: EAIR EFIN PREL EAID PGOV AF
SUBJECT: AMBASSADOR'S CALL ON NEW MINISTER OF TRANSPORT
REF: A) 08 KABUL 2977; B) 09 KABUL 267; C) 08 KABUL 3011; D) 09
KABUL 398
¶1. (SBU) SUMMARY: On March 23, recently confirmed Minister of
Transport and Civil Aviation Hamidullah Farooqi told the Ambassador
that the Afghan government is poised to sign a deal with the UAE to
provide airport security at Kabul and Kandahar airports and open the
Japanese-funded new international terminal at Kabul airport.
Minister Farooqi appeared sympathetic to Kam Air's claim that the
Business Receipt Tax is unfair to Afghan airlines, but acknowledged
that the airlines must pay their taxes. The Ambassador welcomed
Minister Farooqi's efforts to establish a Civil Aviation Working
Group and to shepherd the Civil Aviation Law through Parliament.
The Ambassador assured Minister Farooqi of continued U.S.
cooperation and support of the Afghan civil aviation sector. End
Summary.
¶2. (SBU) In a cordial meeting with newly confirmed Minister of
Transport and Civil Aviation Hamidullah Farooqi, the Ambassador
congratulated Farooqi on his appointment and his strong confirmation
by Parliament. He told Farooqi that the U.S. is delighted to have a
close and cooperative relationship with the Ministry of Transport
and Civil Aviation (MoTCA) and assured Farooqi of continued U.S.
support and engagement as MoTCA works to develop the capacity to
manage Afghan civil aviation operations. Farooqi warmly recounted
his experiences as a student in Queens, New York and thanked the
U.S. government for its strong support of Afghanistan's development
and specifically for the USG's long history of collaboration with
MoTCA. Farooqi said he was pleased to undertake such an important
task, but acknowledged the difficulties that MoTCA has endured in
its leadership. Farooqi noted that the Hajj will be among his
biggest challenges as Transport Minister. He said that he is
hopeful that he can learn from the past experiences and improve the
government's handling of the Hajj (reftel A).
¶3. (SBU) Farooqi told the Ambassador that regional airport
development is among his priorities. Farooqi said many of
Afghanistan's airports were built in the 1960s and now require
updating and rehabilitation to make them functional. The Ambassador
noted the unfortunate circumstances that put the Jalalabad airport
under military control, thereby inhibiting growth in civil aviation
in eastern Afghanistan. Farooqi said MoTCA is hoping to exploit
projects in Nangarhar and thanked the U.S. for promising to help in
the construction of a new civilian airport in Jalalabad. Farooqi
said that MoTCA looks forward to solving this and the Kabul airport
problem. Farooqi noted that Kabul needs a new airport that is
bigger and closer in quality to airports in neighboring countries.
Farooqi solicited USG support for a feasibility study for a new
Kabul airport.
¶4. (SBU) The Ambassador inquired about the status of the recently
completed, Japanese-funded international terminal at Kabul
International Airport. The terminal was officially completed in
November 2008 but sits empty because of security and maintenance
concerns. Farooqi said the new international terminal will be open
in 1-2 months, as soon as he is able to secure a security contract
with the Government of the United Arab Emirates (UAE). Farooqi said
the Afghan government and UAE are ready to sign an agreement on
airport security (reftel B). Farooqi said he plans to travel to Abu
Dhabi soon to sign the agreement. Farooqi told the Ambassador that
the UAE has agreed in principle to expand security contract services
to include all flights departing from Kabul and Kandahar, not just
those going to Dubai. Farooqi noted that MoTCA is also negotiating
an airport maintenance contract. He said that once the maintenance
contract is settled, MoTCA can open Kabul's new international
terminal.
¶5. (SBU) The Ambassador urged Minister Farooqi to encourage tax
compliance by air carriers, and expressed concern that Kam Air's
campaign to eliminate the Business Receipts Tax (BRT) hurts the
GIRoA's efforts to increase budget revenue (reftel C). The BRT,
Afghanistan's equivalent of a value-added tax, is charged to
airlines and other service industries at a rate of 20%. Kam Air has
consistently refused to pay the tax - even though it adds the cost
of the tax to its tickets - and has been lobbying the President and
Cabinet to remove the BRT from airlines. The government's inability
to collect taxes from Kam Air has become a flashpoint with the IMF,
which has made the collection of taxes from all airlines a condition
of its program with Afghanistan. Kam Air argues that the BRT
effectively raises the price of tickets issued by Afghan carriers
and hurts Afghan carriers because in order to cover the tax,
airlines charge passengers more for the same route as the
KABUL 00000790 002 OF 002
international carriers. Therefore, because of the BRT, Afghan
carriers are supposedly less competitive vis-a-vis the international
carriers. The IMF and others oppose this reading, as foreign
airlines must of course pay different taxes levied by their own
governments. To date, Kam Air is the only airline that is
delinquent on its taxes.
¶6. (SBU) Farooqi said the GIRoA is trying to resolve this issue with
the airlines, but indicated that he supports Kam Air's assertion
that the BRT is a double standard because international carriers
like Indian Airlines and Pakistan International Airways do not have
to add this cost to their tickets. Farooqi noted that revenue
collection is a priority of the government and that Minister of
Finance Zakhilwal has promised Parliament to increase tax
collection. Farooqi, a board member of the Afghanistan Chamber of
Commerce and Industries (ACCI), said that the ACCI has discussed the
BRT issue with President Karzai and he believes that Kam Air is
willing to pay "fair" taxes. The Ambassador countered that Kam Air
seems to be a successful, profitable airline, and emphasized that
Kam Air must pay its taxes.
¶7. (SBU) The Ambassador said that the USG has invested a great deal
in Afghan reconstruction and economic development. He noted that
President Karzai often complains that the U.S. does not funnel
enough assistance directly through the Afghan budget. The
Ambassador said it is easier to channel more aid through the budget
if the Afghan government is doing all it can to collect taxes and
achieve fiscal independence. The Ambassador questioned the
legitimacy of Kam Air's claim that international carriers should
also be obligated to pay the Afghan BRT when they pay taxes in their
own countries. For instance, if India decides to subsidize its
airlines, the GIRoA should not use that policy as justification for
not collecting taxes from Afghan airlines.
¶8. (SBU) Farooqi told the Ambassador that MoTCA is working on the
draft Civil Aviation Law and he expects to have it passed by
Parliament within the next couple of months. Noting the lengthy
process it may take to secure Parliamentary approval of the law,
Farooqi posited that perhaps a Presidential decree would be better.
Ambassador encouraged the Minister to work with Parliament and
develop a relationship of trust and confidence with the legislative
body. He noted Finance Minister Zakhilwal's recent success in
obtaining Parliamentary approval on the new budget. Farooqi noted
that Parliament approved his nomination by a very high number and he
believes he can continue to have a positive working relationship
with Parliament.
¶9. (SBU) The Ambassador told Minister Farooqi that the U.S. is ready
to support MoTCA in the establishment of a Civil Aviation Working
Group (CAWG) (reftel D). Farooqi agreed that the CAWG is the best
way to bring together civilian and military international actors
with the MoTCA in support of Afghan civil aviation priorities. The
Ambassador noted that involving the donors, particularly European
countries, will provide opportunities to more effectively solicit
donor funding for civil aviation projects. Farooqi promised to
finish a charter for the CAWG and call the first meeting in the
coming month.
¶10. (SBU) COMMENT: The Ambassador's meeting was cordial and
friendly. Minister Farooqi appeared poised to take on the challenge
of managing a tough portfolio of issues, including the Hajj, which
has led to the downfall of several of Farooqi's predecessors. While
Post applauds his movement towards establishing the CAWG and in
signing the airport security agreement with UAE, the Minister's
other priorities for MoTCA's capacity development were unclear.
Post was disappointed, though not entirely surprised, by Farooqi's
sympathy for Kamgar's anti-BRT campaign, given the Minister's
private sector background. However, we hope that if Farooqi
succeeds as the tenth Minister of Transport, he will understand the
utmost importance that donors and the IMF place on revenue
collection and tax compliance by wealthy airline moguls. End
Comment.
WOOD