Monday, October 19, 2009

Afghanistan: The Wild West Opportunity

I'm back at the 5th Annual U.S.- Afghanistan Business Matchmaking Conference.

The sense I am getting is that there is huge opportunity in Afghanistan, but huge risk. As one speaker here at the conference put it, "There is no need to look for niches, everything is open."

The heavy security problems seem to be generally in the rural areas, but 80% of the population lives in the rural areas. This doesn't mean that there is no risk in Kabul. Captain Tilman Gabriel , President and CEO of Safi Airways, told of a bomb going off in Kabul recently, just 400 meters from where he was.

An even bigger risk in Kabul, than being killed or injured by a bomb, seems to be kidnapping.

As for the infrastructure, there appears to be little, even as you land in Afghanistan and step off a plane. Tilman said Kabul Airport should be a showcase for Afghanistan, instead it is chaos and disaster.

But the contrast to this is the opportunity. Jacob Muinr, President of U.S. based Hi-Tech International, an engineering firm, said that Afghanistan in not about helping build a city or county. It is about building a country.

Speakers identified immediate needs in industries such as construction, transport, textile, banking, agriculture support, internet, carpet exporting, waste disposal, gem stone mining, copper mining and marble mining.

How bad are services needed? Timothy Haider of T. Haider & Associates, who has been training the police force in Afghanistan, told me that they have switched to paying the police force by cell phone. He said that there are so few bank branches that some police were going for months before they were able to get to an area where a bank was located so that they could cash their checks.

With cell phone payment, they get notice of their pay on their cell phone and then go to a cell phone store to get paid out cash. "Cash is king in Afghanistan," Haider told me.

By far the most negative about Afghanistan was speaker Robert Mossbacher. Mossbacher, a long-time Bush operative, said that there were problems with bureaucracy, electricity and corruption in Afghanistan. He said that some things that should take a day to be cleared, take months in Afghanistan. He said corruption was unavoidable and it went from getting permits to gaining access to markets. Was he trying to spook others from entering his little playground?

Mossbacher was followed at the podium by Mariam Nawabi. Nawabi, who has served as Senior Advisor to the Afghan-American Chamber of Commerce and Afghanistan International Chamber of Commerce, pretty much offered solutions for the problems Mossbacher bitched about. She stated that she favored only limited government and that if a section in the government was slowing things down, "just move on." She said that if you faced corruption, "it should not be tolerated," that it should be reported to U.S. officials.

By the time she finished speaking, the only thought, I had was that Mossbacher really needs to hire Nawabi.

Former central banker, Noorullah Delawari, spoke of the possibility of a 7 year tax holiday for new investors. He said that Afghanistan in the past had various tax holidays, ranging from 4 to 8 years. He said that a new tax holiday would be very controversial and that, no surprise here, the IMF was against it. When I asked Delawari what the current tax rate is, he told me that it was 20% for both corporations and individuals.

Later in a private discussion, Peter Montgomery Buttigeg of McKinsey & Company told me that in addition to the tax there were various fees that could boost overall payouts to the government substantially.

Bottom line, for the extremely adventurous, there is tremendous opportunity in Afghanistan, but it would be foolhardy to attempt it without proper guidance. As one international operator told me, in Afghanistan you need to show your Afghan face, not your American face.

For anyone attempting an Afghan venture, the Afghan-American Chamber of Commerce seems to be quite willing and able to help any Afghan adventurers.

They appear to be well lead by Chairman Ajmal Ghani A. and President Dr. Donald Ritter.

I was also very impressed Nawabi. My sense is that she knows how to move mountains, even Afghan mountains, when they need to be moved.

1 comment:

  1. The very thought of a multi-year long tax holiday has me awestruck. That would be AMAZING if something like that could be accomplished in the US. I realize this type of policy is next to impossible, but what a great dream to have. Can you imagine the wealth that could be created under such a scenario?

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