US embassy cable - 03KABUL1006

C O N F I D E N T I A L SECTION 01 OF 03 KABUL 001006 
 
SIPDIS 
 
NSC FOR ZKHALILZAD, JDWORKEN, HMANN, RHANSON, DSEDNEY 
DEPT FOR SA/PAB, SA/AR, EUR/WE 
MANILA PLEASE PASS AMB PSPELTZ 
USDOC FOR DAS/TD MURPHY AND AFGHAN RECON TASK FORCE 
STATE PASS USAID FOR JPRYOR 
STATE PASS TDA FOR DSTEIN AND JSUSSMAN 
STATE PASS TREASURY FOR U/S TAYLOR, LMCDONALD 
STATE PASS OPIC FOR RCONNELLY AND DZAHNHEISER 
 
E.O. 12958: DECL: 04/17/2013 
TAGS: PREL, PGOV, ECON, EFIN, AF 
SUBJECT: AMBASSADOR'S APRIL 8 MEETING WITH CAPTAIN DAOUD: 
PRIVATE AIRLINE PROPOSAL FACES AFGHAN GOVERNMENT RESISTANCE 
 
Classified By: AMBASSADOR ROBERT P. FINN FOR REASONS 
1.5 (B) AND (D) 
 
1. (C) Captain Daoud, an Afghan-American investor interested 
in establishing a private airline in Afghanistan, met with 
Ambassador on April 8.  Daoud is seeking OPIC support for the 
establishment of Oxus Air, a private airline serving the U.S. 
and Europe from Afghanistan with a projected fleet of 12 
Boeing aircraft.  A projected second phase of operations 
would include domestic Afghan operations.  Daoud told the 
Ambassador that the Deputy Minister of Civil Aviation, Raz 
Mohammad Alami, told him earlier in the week that he was 
required to own his entire fleet outright to secure an Afghan 
airline operation license. 
 
2. (C) The Ambassador was surprised to learn of this 
restraint on competition, and asked if other airlines 
operating in Afghanistan were subject to this provision. 
Daoud answered that traditionally such decisions ) whether 
to purchase or lease an aircraft fleet or a combination of 
both - were individual business decisions made by the airline 
operator.  Daoud told Ambassador that he had scheduled a 
round of meetings, beginning with VP Amin Arsala on April 9. 
He noted that Civil Aviation, and Alami in particular, had 
had his application since August 2002.  During the interim, 
Alami had asked him to save Ariana rather than competing with 
it and driving it out of existence.  Daoud said that he told 
Alami that Ariana could only be saved if it was partially or 
fully privatized.  Daoud reported his impression that under 
the administration of Minister Sadeq, Ariana,s functions 
were undermined by a web of patronage jobs, aircraft 
rerouting for VIP charters, extremely weak management and 
technical expertise, and enormous numbers of redundant public 
employees.  Daoud added that Ariana had not maintained a 
balance sheet in 21 years. 
 
3. (C) Daoud felt that only through either partial or 
complete transferral of Ariana to private hands would genuine 
management improvements, job creation and technological 
advancement be possible.  Alami delayed repeatedly until the 
recent &decision8 that all planes must be owned in advance 
of licensing.  (Note: The state of the civil aviation sector 
can be illustrated through additional recent examples.  Daoud 
told of one Panjshiri Afghan who ) reportedly with help from 
Defense Minister Fahim - was able to travel to India for 
Airbus pilot training, which he failed.  Nonetheless, he then 
recruited an American friend to conduct a totally invalid 
&free-lance check-out8 for him in Afghanistan, and was 
issued a pilot,s license.  This individual currently flies 
for Ariana.  Another example is the dismal performance of the 
Civil Aviation Ministry,s candidates for Air Traffic Control 
Training in the U.S.  Of 19 hand-picked candidates taking a 
USG-sponsored English aptitude test in Kabul on April 14, 
none passed ) with the highest score a 38 out of a possible 
100.  Finally, Daoud noted that during his own Ariana flight 
from Frankfurt, 30-40 passengers were sitting in the aisles 
of the aircraft.  Endnote.) 
 
4. (C) The Ambassador asked why Daoud had not asked the 
Embassy for help earlier.  Daoud said he tried calling a few 
times from the U.S. without success, but decided that to 
solve this problem he needed to come to Kabul.  Daoud 
continued bashing Ariana for some time, alleging that one of 
its pilots was a former gunrunner for Ahmad Shah Masood and 
that Ariana planes frequently transported drug money.  Daoud 
recounted that Finance Minister Ghani had suggested that 
Ariana could be auctioned.  Daoud scoffed at this suggestion, 
noting that he had heard that Ghani,s brother, through 
intimidation and improper influence, had won similar rigged 
auctions in the recent past.  The Ambassador responded that 
Heshmat Ghani might indeed be corrupt, but that Minister 
Ghani kept him at a distance and certainly did not condone 
his activities.  Daoud replied that the father of both 
Heshmat and Ashraf Ghani was well known for corruption, which 
tainted the entire family.  According to Daoud, &one or two 
people are stifling everything8. 
 
5. (C) The Ambassador agreed that much of the government was 
still locked in old Soviet-era thinking about economic 
matters.  The legacy of decades of state control of the 
economy, he added, continues to slow the pace of necessary 
economic reforms, and privatization reforms are among these. 
Daoud wants now to actively seek USG support for his efforts 
and noted he was planning to obtain an all-Boeing fleet for 
Oxus Airlines. 
FINN