News / Asia

Afghanistan Is Fertile Ground for Investment

With security improving after decades of armed conflict, opportunities abound in one of world's fastest-growing economies

Raymond Thibodeaux

The war in Afghanistan has not kept a growing number of multinational firms from investing there.  Of the 800 foreign companies licensed to do business in Afghanistan, only about 10 percent are from the United States, leading some Afghans say there are a lot of American boots on the ground there but not enough American wing-tips, a common style of shoe worn by businesspeople.

In this street market, many shops sell hand-woven carpets, lapis and sky-blue burqas - the billowy head-to-toe covering worn by many Afghan women.  From the time before Alexander the Great conquered this region, Herat has been a hub of commerce, linking the Middle East, Central and South Asia.

But three decades of armed conflict have resulted in many local businesses shutting down and investors being scared off. That is according to Shafiq Ahmadi, a director for the Afghan Investment Support Agency - the country's business-licensing body.

He says the main security problem was the kidnapping of investors and rich people in Afghanistan, specifically in Herat.

Ahmadi says the Taliban and criminal gangs flourished in the foothills and farms around the city - that is until U.S.-led coalition troops started making inroads here more than a year ago.


View Larger Map He says that, with security getting better, we can see some of the effects.  He says the industrial parks, where 50 percent of the companies closed, are now starting to reopen.

That is a start, but Ahmadi says many of Herat's wealthiest entrepreneurs have not come back from cities as far flung as Dubai, London and San Francisco, where they fled the fighting.

That has created opportunities for people like Andre Mann, who operates The Great Game trekking company, one of only two in the country. He says it is rare to meet other expats with business start-ups, especially Americans.

"You run across these people once in a while, but there [are] not many Americans doing that," Mann said. Do you think many Americans want to come and do business in a war-torn country?"

An avid hiker and mountain climber, Mann says the country's natural beauty compelled him to move here and start his trekking company. But he says there are hazards to doing business in a conflict-prone country.

"Afghanistan is frankly a tough place to do business.  And, there are other places that are a lot easier to invest in, where you don't have war risk, for one, and you don't have the corruption issue like you do here," Mann said.

Corruption was one of the big issues President Obama addressed during his recent visit to Afghanistan.  But many here say corruption is entrenched in Afghanistan's economy, which, at about 15 percent a year, is one of the world's fastest-growing, according to World Bank estimates.

A growth rate like that is bound to attract entrepreneurs.  In Herat, small-scale businesses are starting to crop up:  a Belgian café on the city's main street; a couple of Indian restaurants; a German machine repair shop. And there are many shops selling burgers, pizzas and fried chicken - often owned by Afghans returning from abroad, known here as Half-Ghans.

On a larger scale, a US-based company launched a cellular phone service here.  Coca-Cola opened a $25 million bottling plant near Kabul. Nearby, a Chinese firm plunked down $3 billion for a copper mine, one of the world's largest.  German traders are sending about $200 million in goods to Afghanistan, up from about $21 million in 2000.

Brad Hansan, the U.S. senior civilian representative in Western Afghanistan, says the security improved in this western province and that the United States is helping revive the business community.

"There are efforts under way to try to have foreign businesspeople come to Herat and see for themselves the opportunities here and the openness of many Afghan entrepreneurs for partnerships with foreign businesspeople to help expand their businesses," Hansan said.

He says many businesses - especially in the farming sector - are hampered by the country's lack of infrastructure.

"It has a fairly well-educated, literate population. It has a long history of trade and entrepreneurship going back centuries. And, it has water and electricity most of the time," Hansan said.

On those terms, he says Herat is better prepared for business than other parts of the country.

Rahim Walizada - a carpet and handicrafts dealer in Kabul - exports many of his products to U.S. retailers such as ABC Carpet & Home. Still, he says he rarely sees American buyers in Kabul.

"I see many Europeans and a lot of Indians, but not many American companies here.  We are surprised they are not coming here."

He says many Afghan entrepreneurs bristle when foreign retailers buy Afghan-made products from neighboring Pakistan, seen as a safer place for markets. He wants foreign retailers, especially American ones, to buy directly from Afghan suppliers.

"They should come. Kabul is a beautiful city, I would say. Afghans have great hospitality. And they [American businesspeople] should come, we're ready to do business with them," Walizada said.

Afghan officials say they need to raise at least $15 billion in the next decade to rebuild the country.  Hansan says the benefits of investing in Afghanistan are not only profits, but providing jobs and, with them, a chance at stability and peace for the country.

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