! ! ! ! ! ! ! ! Speech!by!H.E.!Dr.!Anwar!UL!Haq!Ahady! Minister"of"Commerce"and"Industries" Islamic"Republic"of"Afghanistan"" ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! The!Afghan9American!Chamber!of!Commerce!! th 8 !Annual!U.S!–!Afghanistan!Business!Matchmaking!Conference!! December!2012! Washington!DC.,!USA!
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! Your"Excellencies,"distinguished"guests,"investors,"fellow"Afghans,"ladies" and" gentlemen," good" morning." I" would" like" to" begin" by" thanking" the" AfghanD" American"Chamber"of"Commerce"for"inviting"me"to"address"this"annual"meeting." This" is" my" second" appearance" in" your" gatherings." Your" organization" is" very" important"for"me"because"in"addition"to"being"investors,"you"are"one"of"our"very" important"links"to"the"international"business"community."""" Probably"some"of"you"recall"that"a"few"years"ago"I"argued"in"front"of"you" that" Afghanistan’s" business" legal/regulatory" environment" is" quite" liberal," a" trait" which" investors" should" find" attractive." I" still" believe" that" based" on" our" businessD friendly" legal/regulatory" environment," we" can" compete" with" other" countries" for" attracting" investors." Today," I" will" reiterate" some" of" my" arguments" regarding" the" merits" of" our" legal/regulatory" business" environment" that" you" might" be" familiar" with."Furthermore,"I"will"talk"about"specific"sectors"which"we"believe"offer"great" investment"opportunities.""Here"I"would"like"to"be"a"bit"elaborate."So,"please"bear" with"me."I"would"also"address"the"issue"of"post"D2014"expected"increase"insecurity" and"uncertainty"which"usually"make"investors,"hesitate"to"commit."" Ladies" and" gentlemen:" I" am" sure" that" you" would" agree" with" me" that" investors" find" a" combination" of" a" liberal" legal/regulatory" regime," adequate" 2" "
development" of" infrastructure," and" the" availability" of" both"skilled" as" well" as" low" cost"unskilled"labour"force"quite"attractive"for"doing"business."I"think"in"the"past" 10"years,"President"Karzai’s"government"has"established"a"very"business"friendly" legal/regulatory" framework;" has," at" the" very" least," built" the" minimum" level" of" infrastructure" required" for" modern" businesses," and" our" vocational" training" institutions" have" graduated" a" large" number" of" skilled" workers;" I" should" also" add" that" there" are" also" millions" of" less" skilled" Afghans" who" are" looking" for" work" at" much"lower"wages." Let"me"elaborate"on"our"liberal"legal/regulatory"business"regime."As"you" know,"our"constitution"includes"provisions"on"the"sanctity"of"private"property"and" establishes" a" market" economy" as" our" economic" system." Our" Central" Bank" Law" establishes" the" independence" of" the" Central" Bank" and" the" autonomy" of" our" monetary"policy."Our"Banking"Law"regulates"the"operations"of"a"privately"owned" banking"system"in"accordance"with"the"principles"of"a"market"economy."We"have" adopted" a" very" liberal" investorDfriendly" foreign" exchange" system" which" allows" people"to"legally"bring"money"to"the"country"and"easily"take"it"out"again."We"have" allowed"banks"to"open"foreign"exchange"accounts."We"have"adopted"a"Financial" Management" Law" that" emphasizes" fiscal" discipline" and" management" of" public" finances"in"line"with"best"international"practice."Our"Income"Tax"Law"emphasizes" 3" "
simplicity" and" our" tax" rates" are" the" lowest" in" the" region." Similarly," we" have" the" lowest"custom"tariffs"in"the"region"and"our"tariff"categories"are"simple"and"few"in" number." Our" Investment" Law" is" very" investor" friendly." We" allow" 100%" foreign" ownership" of" enterprises," easy" repatriation" of" profits," treat" foreign" investors" identically"to"domestic"ones,"and"we"allow"accelerated"depreciation"as"well"as"taxD holidays." In" the" past" year" the" Ministry" of" Commerce" and" Industry" has" reviewed" and"updated"the"legal"framework"for"business"in"Afghanistan."Amendments"have" been"proposed"to"the"Law"on"Corporations"and"Limited"Liability"Companies,"the" Law"on"Arbitration"and"the"Private"Investment"Law"with"the"intention"to"make"all" of" them" even" more" business" friendly." Final" drafts" of" a" Bankruptcy" Law," a" Competition"Law"and"a"Consumer"Protection"Law"and"regulations"for"a"range"of" sectors"have"been"sent"to"the"Ministry"of"Justice"for"processing."" Similarly," the" newly" revised" Mining" Law" of" 2010" makes" it" significantly" easier"to"invest"in"extractive"industries."It"streamlines"bidding"processes"and"has" reduced"royalties."" In" short," we" are" well" on" the" way" to" creating" a" modern," world" class," business"friendly"legal"framework."However,"there"is"some"concern"that"in"spite"of" 4" "
a" business" friendly" legal" framework," the" business" climate" in" Afghanistan" is" compromised"by"administrative"obstacles."Although"Afghanistan"ranks"quite"well" with"respect"to"some"of"the"World"Bank’s"Doing"Business"Indicators"it"is"not"doing" well"with"regard"to"others." The"government"intends"to"improve"its"DBI"ranking."At"the"Ministry"of" Commerce" and" Industry," we" are" focusing" this" year" on" improving" our" rank" with" regards" to" the" trading" across" borders" indictor," the" closing" a" business" indicator," and"the"protecting"investors"indicator."Next"year,"in"addition"to"these"indicators," we"will"focus"on"registering"property"and"dealing"with"construction"permits."Our" intention" is" to" improve" our" ranking" to" the" point" where" we" sit" above" the" global" average"by"the"end"of"2014."Perhaps"more"significantly"we"intend"to"address"the" concerns"of"the"investors"across"all"areas"even"in"those"which"are"not"measured" by"the"DBI"indicator." Investors" also" desire" fiscal" and" monetary" stability." Currently" we" are" operating" under" our" third" IMF" program." Throughout" the" past" decade" we" have" exercised" great" fiscal" discipline" D" we" have" never" had" a" budget" deficit." We" successfully" negotiated" a" 100%" write" off" of" our" old" loans," totaling" $11" billion," under"the"Paris"Club"agreement."We"are"now"one"of"the"least"indebted"states"in" the"world."We"have"also"pursued"a"tight"monetary"policy"which"has"ensured"that" 5" "
inflation" is" low" and" the" exchange" rate" for" our" national" currency," the" Afghani," stable." For" many" years" Afghanistan" did" not" have" an" official" industrial" policy." Many" Afghan" industrialists" complained" that" the" government’s" laissezDfaire! approach" to" industrialization" has" made" it" very" difficult" for" infant" industries" to" succeed" in" Afghanistan." In" response," almost" one" year" ago," the" Ministry" of" Commerce" and" Industries" prepared" an" industrial" policy" which" was" approved" by" the"cabinet"two"months"ago."Consequently,"the"government"will"establish"a"fund" to"help"SME’s"acquire"credit"at"affordable"rate;"the"government,"within"the"WTO" guidelines," will" use" custom" tariffs" for" a" limited" period" to" help" infant" industries" compete" with" foreign" producers;" the" government" will" provide" industrial" land" to" our" industrialists;" and" government" will" give" investors" the" choice" of" 7" years" taxD holiday" or" accelerated" depreciation." Thus," we" have" made" significant" progress" in" establishing" a" businessDfriendly" legal/regulatory" environment" and" we" have" provided"the"necessary"policy"clarifications.""" Of" course" it" is" not" enough" to" create" a" benign" legal" and" regulatory" environment;" action" is" also" required" to" address" weaknesses" in" other" areas." In" particular" there" is" a" need" to" ensure" that" infrastructure" is" adequate" and" that" necessary"skills"and"services"are"readily"available."" 6" "
Since"2002"we"have"built"the"basic"infrastructure"necessary"to"support"a" modern"economy."The"ring"road"around"Afghanistan"has"been"open"for"a"number" of" years" now" and" is" almost" completely" paved." Critical" highways" connecting" Afghanistan" to" Iran," Turkmenistan," Uzbekistan," Tajikistan" and" Pakistan" are" completely" asphalted." Thousands" of" kilometers" of" new" highways" are" under" construction" such" as" the" NorthDSouth" corridor," the" KabulDJalalabad" alternate" highway," the" West" EastDHighway" and" the" SarobiDJabalDSoraj" byDpass." In" the" last" decade,"the"supply"of"power"has"increased"by"800%."Transmission"lines"have"been" built"throughout"the"country"which"have"enabled"us"to"import"electricity"from"our" neighbours." A" national" power" grid" is" being" developed" which" will" connect" the" entire" country." New" power" generation" capacity" will" be" opening" next" year" in" a" number"of"areas."In"the"longer"term,"we"are"planning"to"build"a"number"of"major" hydroDpower" dams." These" plans" were" endorsed" at" the" RECCA" 5" conference" in" Tajikistan"and"the"Tokyo"conference."And"in"the"short"to"medium"term"we"intend" to" further" increase" our" imports" of" power" from" neighbouring" countries." In" short," therefore," I" can" assure" you" that" in" most" parts" of" the" country" you" will" find" that" power"supply"for"both"consumers"and"industry"is"more"than"adequate." Similarly," the" first" segment" of" the" new" railway" connecting" us" to" Uzbekistan" was" completed" last" year" and" is" currently" operational." Afghanistan" 7" "
intends" to" extend" this" railway" to" connect" Mazar" Sharif" to" Heart," Iran" and" eventually" Europe." Similarly," we" would" like" to" build" another" railway" to" connect" Shir" Khan" Bander" to" Kabul," Jalalabad" and" Pakistan." These" projects" have" moved" beyond" the" design" phase" with" funding" for" the" MazarDHerat" line" having" been" secured"from"the"ADB,"and"China"committing"itself"to"build"the"Shir"Khan"BanderD KabulDJalalabad" line." Building" these" railways" is" a" critical" part" of" Afghanistan’s" strategy" to" become" the" land" bridge" between" Central" and" South" Asia" and" the" Middle" East." These" railways" will" also" benefit" the" development" of" our" mineral" resources"which"will"have"great"developmental"impact"on"our"economy.""" We" have" also" worked" hard" to" improve" other" aspects" of" our" transport" system." We" have" a" new" international" airport" in" Kabul" which" is" now" served" by" more" than" 10" international" airlines." Work" on" upgrading" the" airports" in" Mazar" Sharif," Khandahar" and" Herat" is" complete" and" they" are" already" receiving" international"flights." We"are"intensifying"our"efforts"at"building"industrial"parks."Six"are"now" operational"in"Kabul,"Khandahar,"Herat,"Helmand,"Bagrami"and"MazarDiDSharif."A" further" seven" will" open" in" Jalalabad," Khandahar," Herat," Helmand," Parwan" and" MazarDiDSharif"in"the"next"two"years."
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The"market"for"professionals"has"also"changed."Until"a"few"years"ago"we" suffered"from"acute"shortages"of"qualified"workers"in"key"professions."While"this" problem" has" not" gone" away" completely," many" expatriate" professionals" have" returned"home"in"recent"years"and"they"have"been"joined"by"a"large"number"of" Afghans" who" have" completed" their" studies" abroad," particularly" in" India." Furthermore,"there"has"been"a"dramatic"increase"in"Afghanistan"in"enrollments"in" vocational"education"and"in"our"universities."" In"short,"I"believe"that"in"the"past"ten"years"we"have"created"a"businessD friendly" legal/regulatory" regime;" we" have" trained" skilled" professionals" and" dramatically" increased" our" vocational" training" services;" we" have" built" the" infrastructure" that" a" modern" economy" requires;" we" have" kept" our" wages"" competitive"and"our"labour"practices"flexible;"and"we"have"increased"our"access" to"regional"markets"for"exports."" Ladies"and"gentlemen;"as"I"am"sure"you"are"aware,"the"establishment"of" a" businessDfriendly" environment" does" not" in" itself" guarantee" investment." There" also"have"to"be"profitable"projects"to"invest"in." In" a" more" mature" market" economy," the" identification" of" investment" opportunities" can" safely" be" left" to" the" private" sector." However," in" an" emerging" 9" "
economy"like"Afghanistan,"there"is"a"need"for"the"public"sector"to"go"further"and" help"potential"investors"identify"investment"opportunities"and"work"with"them"to" ensure"that"this"potential"is"realized."" It"is"in"this"context"that"I"asked"our"experts"in"the"Ministry"of"Commerce" to" study" our" economy" to" identify" areas" where" we" thought" Afghanistan" would" either" be" able" to" export" competitively" or" where" it" had" the" capacity" to" replace" imports." Our" study" concluded" that" Afghanistan" can" compete" in" at" least" seven" export" oriented" and" ten" import" substitution" industries." The" export" oriented" sectors" include:" cashmere," marble" slabs" and" tiles," handDmade" carpets," agriD business" (particularly" adding" value" to" fresh" fruit)," gemstones" and" jewelry," medicinal"plants"and"leather"goods."The"eleven"sectors"where"we"believe"we"can" substitute" for" imported" goods" are" mostly" in" the" area" of" refined" petroleum" products," " cement," rebar" steel" and" other" rolled" products," eggs" and" live" poultry," edible" oil," sugar," dairy" products," plastic" piping," fruit" juice" and" a" number" of" light" manufacturing"sectors."" Let"me"elaborate:"our"experts"tell"us"that"the"best"Afghan"marbles"are" comparable"to"the"finest"Italian"ones"and"we"have"managed"to"displace"them"in" regional" markets" where" we" have" become" the" preferred" supplier" for" highDquality" white"marble."Our"experts"believe"that"Afghanistan"can"reasonably"expect"to"be" 10" "
exporting" $700D800" million" worth" of" marble" annually" in" the" foreseeable" future." There"are"some"great"investment"opportunities"in"this"area"and"with"a"number"of" foreign" companies" poised" to" enter" the" market" and" transport" links" continuing" to" improve,"I"would"suggest"that"the"time"to"act"is"now." The"weaving"of"carpets"is"Afghanistan’s"oldest"industry."Afghan"carpets" are" world" renown" for" their" quality" and" are" produced" at" a" competitive" price." However," this" industry" is" for" the" most" part" stuck" at" the" lower" end" of" the" value" chain." Much" of" the" value" add" is" done" outside" of" the" country" where" cutting" and" washing"of"the"carpets"usually"takes"place."There"are"opportunities"to"repatriate" this" activity;" introduce" nonDtraditional" designs" and" improve" the" marketing" and" export" of" these" handDmade" carpets." " I" know" of" some" modern" Afghan" entrepreneurs" who" have" done" quite" well" in" modernizing" the" Afghan" carpet" industry." Afghanistan" is" one" of" three" countries" in" the" world" that" produces" cashmere" wool." We" used" to" export" these" in" their" rawest" form" for" processing" abroad." Recently," we" established" a" PPP" in" Herat" with" a" Belgian" and" a" British" company" to" process" our" cashmere" here" and" we" have" been" approached" by" a" number"of"international"companies"looking"to"set"up"factories"to"spin"yarn,"weave" cashmere"fabric"and"even"make"cashmere"garments"here." 11" "
Afghanistan’s"climate"is"excellent"for"fruits"and"fresh"and"dry"fruits"have" been" our" largest" export" item" for" years," currently" around" $250" million." There" is" significant" room" for" adding" value" to" our" fruit" through" further" processing," improved" packaging" and" branding," and" ample" room" to" increase" export" volumes" by"increasing"storage,"developing"new"markets,"and"ensuring"the"certification"of" product" to" international" standards." It" is" my" view" that" substantial" value" can" be" realized" in" this" area" with" relatively" minor" investment" through" commercializing" and"modernizing"the"production,"packaging,"storage"and"export"processes"of"fruit." There"are"also"opportunities"in"further"processing"in"areas"like"the"production"of" juice,"caning"fruit"and"the"harvesting"and"export"of"medicinal"plants."" In" addition" to" exportDoriented" in" industries," a" number" of" importD substitution"industries"offer"great"investment"opportunities."""Lately,"the"Ministry" of" Mines" has" been" reporting" good" news" regarding" the" hydrocarbon" deposits" in" Afghanistan."The"Ministry"believes"that"there"are"huge"deposits"of"natural"gas"on" the" Afghan" side" of" the" AfghanDTurkmen" border." A" concession" for" extraction" of" petroleum" has" been" given" to" a" Chinese" company" on" the" AmuDDarya" petroleum" deposits." And" the" bidding" process" for" similar" concession" on" the" AfghanDTajik" hydrocarbon" deposit" is" progressing" well." Given" Afghanistan’s" over" three" million" tons" demand" per" annum" for" refined" petroleum" products," building" refining" 12" "
capacity" also" seems" very" attractive." Dear" investors;" these" businesses" are" quite" lucrative."You"should"really"consider"investing"in"these"projects." """" Similarly,"despite"having"the"raw"materials"that"are"required"for"cement" production"in"abundance,"Afghanistan"imports"almost"a"billion"dollars"of"cement" each"year."Given"the"huge"demand"for"cement"here,"the"high"cost"of"transporting" it" from" neighbouring" countries" and" the" presence" of" the" necessary" mineral" precursors," our" experts" believe" that" investment" in" the" establishment" of" large" scale"efficient"modern"cement"plant"will"be"profitable."In"passing,"it"is"also"worth" noting" that" our" experts" believe" that" the" current" building" boom" will" not" end" in" 2014;"rather,"it"will"continue"for"some"time;"and"a"market"this"size"is"already"large" enough"to"accommodate"a"number"of"large"modern"efficient"cement"plants."" Similarly," the" market" for" rebar" and" related" rolled" products" is" around" $600D800" million" per" annum." Given" the" ready" availability" of" scrap" iron" and" the" high"cost"of"transport"from"neighbouring"countries,"our"experts"suggest"that"the" production" of" rebar" and" other" rolled" products" can" be" undertaken" profitably" in" Afghanistan."
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The" companies" that" won" the" tender" to" develop" the" Hajigak" iron" ore" deposit"will"be"building"a"steel"mill"as"part"of"their"development"of"this"mine,"the" output" of" which" will" further" improve" the" competitiveness" of" any" rolling" mills" established"here."" Further" opportunities" for" import" substitution" exist" in" the" egg" and" poultry" sector" and" the" sugar," dairy" and" edible" oil" sectors." These" are" all" areas" where" Afghanistan" previously" was" largely" selfDsufficient." Twenty" years" of" war" destroyed" the" infrastructure" supporting" these" industries" and" while" they" have" restarted," they" often" lack" the" technology," expertise" and" scale" to" be" truly" competitive." It" is" our" belief" that" an" investor" willing" to" introduce" more" modern" production" in" these" areas" will" find" that" he" or" she" makes" an" excellent" return" on" their"investment."" Similarly,"a"burgeoning"light"manufacturing"sector"has"emerged."In"it"a" number" of" ingenious" local" entrepreneurs" have" restarted" production" of" goods" as" diverse"as"fans,"washing"machines,"turbines"and"plastic"piping."All"of"these"sectors" have" ample" room" to" grow" and" all" would" benefit" from" an" injection" of" outside" expertise,"technology"and"marketing"and"export"savy.""
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For"the"development"of"each"of"these"seventeen"sectors"the"Ministry"of" Commerce"and"Industry"has"prepared"a"strategy"and"an"action"plan."We"are"ready" to"advise"national"as"well"as"foreign"investors"regarding"the"development"of"these" industries" and" how" best" to" profit" from" them." " We" will" continue" our" efforts" to" identify" additional" industries" where" Afghanistan" can" compete" with" others." With" the" help" of" donors" we" would" like" to" strengthen" the" capacity" of" the" Ministry" of" Commerce" and" Industry" to" guide" investors" to" more" profitable" projects" and" provide"them"with"more"detail"on"the"financial"returns"they"can"expect." However,"some"investors"are"reluctant"to"take"a"chance"on"Afghanistan" because"of"the"impending"withdrawal"of"international"forces"from"there"and"the" expected" uncertainty" that" will" follow" the" withdrawal" of" forces." The" relationship" between" security" and" growth" is" well" known." A" minimum" level" of" security" is" precondition"for"growth."To"paraphrase"Thomas"Hobbes,!in"a"state"of"nature,"i.e." insecurity,"there"is"no"economic"development."" Ladies"and"gentlemen,"let"me"assure"you"that"our"security"forces"will"be" able" to" protect" the" state" and" provide" security" for" the" people." The" conflict" may" continue"for"a"while,"but"I"cannot"believe"that"armed"opponents"of"the"regime"will" prevail.""I"believe"that"in"the"most"parts"of"Afghanistan"the"level"of"security"is"well" above"that"which"is"needed"for"economic"development"to"occur;"that"is"why"there" 15" "
is" so" much" interest" in" mining" concessions" in" Afghanistan." The" flip" side" of" the""" exaggerated" perceptions" of" the" security" risk" involved" in" doing" business" in" Afghanistan" is" that" there" are" a" wide" range" of" highly" profitable" investment" opportunities"that"have"yet"to"be"taken"up."And"I"believe"that"even"when"we"take" into"account"the"high"level"of"risk,"the"return"on"investment"there"is"greater"than" in" most" other" parts" of" the" world." With" the" assurance" of" continued" donors’" support" that" was" expressed" at" both" Chicago" and" Tokyo" conferences," combined" with"the"strength"of"our"security"forces,"I"believe"that"our"economy"will"continue" to"grow,"and"we"will"be"able"to"manage"our"security."" Ladies" and" gentlemen" let" me" recap." Presidents" Karzai’s" administration" has" established" a" very" businessDfriendly" legal" and" regulatory" regime" in" Afghanistan." In" this" regard" we" can" compete" not" only" within" the" region" but" also" beyond." " We" are" now" focusing" on" removing" administrative" obstacles" to" doing" business" and" we" are" determined" to" significantly" improve" our" rank" in" the" World" Bank’s" Doing" Business" Indicators" during" the" next" three" years." We" have" already" built"the"minimum"necessary"infrastructure"and"we"intend"to"invest"a"large"sum" on" further" improvements" of" our" infrastructure." Indeed" construction" of" railways" and"new"highways,"power"generation,"transmission"and"distribution"constitute"a"
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major" part" of" our" request" for" development" assistant" that" were" endorsed" by" donors"in"Tokyo"and"Tajikistan." Our"major"cities"such"as"Kabul,"Heart"and"MazarDeDSharif"already"enjoy" adequate" power;" Jalalabad" and" Kandahar" will" soon" benefit" from" restoration" of" power"generation"facilities"at"Naghlu"and"Kajaki,"respectively."The" government’s" focus" on" vocational" training" is" supported" by" donors" and" we" are" graduating" over" thirty" thousand" skilled" laborers" annually" from" our" vocational" training" institutes." We" have" identified" a" large" number" of" exportDoriented" as" well" as" importD substitution" profitable" industries." The" Ministry" of" Commerce" and" Industry" has" begun" to" develop" the" capacity" to" advise" potential" investors" in" these" as" well" as" other"industries." In" many" sectors," Afghanistan" is" a" virgin" market." As" a" result," there" are" numerous" opportunities" for" investment" with" high" returns." And" of" course" as" we" make"progress"on"building"our"infrastructure,"and"connecting"it"to"the"rest"of"the" world," and" as" the" SME" sectors" expand" and" large" scale" mining" and" hydroDcarbon" extraction" projects" come" on" stream" the" prospects" for" investment" will" become" brighter"still."
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Despite"some"security"risks,"I"am"very"firmly"of"the"view"that"even"when" you"take"into"account"the"high"level"of"risk,"the"return"on"investing"in"Afghanistan" is" much" greater" there" than" in" most" other" parts" of" the" world." Thus" ladies" and" gentlemen,"I"invite"you"to"come"to"Afghanistan"and"invest"there,"produce"goods" that" you" can" sell" there" and" aboard," employ" Afghans," make" a" healthy" profit" and" help" our" country" grow." " Your" investment" will" not" only" benefit" you" and" your" employees," but" will" also" help" create" conditions" that" will" promote" peace" and" stability"in"the"region."This"is"a"great"case"where"selfDinterest"coincides"with"public" interest." I" hope" that" you" will" not" miss" this" opportunity," and" decide" to" invest" in" Afghanistan"" Thank"you."
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