Changing face of Afghanistan

Despite the lack of proper infrastructure, Afghan business is sprouting in shallow soil as demand for retail items surplus supply


The aisles of the newly expanded Chelsea Market in Kabul are a colourful barometer of the consumer craze that is sweeping Kabul, a poor but fast-growing capital of 2.5 million that is awash in foreign aid, international visitors and a steadily growing number of affluent returned refugees.

The shelves are crammed with imported items not seen here in years, if ever: microwave popcorn and "Miaow Mix," cling wrap and Clorox, Gillette razors and Grey Poupon mustard. Recently the owner, Assad Chelsi, has been experimenting with luxury items such as French cosmetics and fountain pens, and he soon plans to add a pharmacy upstairs.

"If you don't see it in the store today, I can get it for you tomorrow," Chelsi, 37, promises with the confident cheer of a born entrepreneur. He has circles under his eyes, but only from working around the clock to keep up with demand. "During the Taliban time, I had about 200 customers a day. Now I can't even count, maybe 2,000. People are free now, and everything has changed."

More evidence

The view from Chelsi's corner of Kabul, a busy shopping area full of neon-flashing restaurants and Internet cafés, might seem to support such buoyant hyperbole. Along the surrounding streets, there is more evidence of a spending surge: dozens of showy new or half-built houses with elaborate pillars, intricate tile designs and rooftop satellite dishes.

But just beneath the glitter lies an economy urgently in need of industrial and commercial development. Nearly two years after the collapse of extremist Islamic rule under the Taliban and the establishment of a pro-Western, UN-backed government, most of the Afghan economy is still a rudimentary sidewalk bazaar, propped up by foreign assistance and a burgeoning opium poppy trade.

The vast industrial park East of the capital, abandoned and destroyed during the civil war of the 1990s, is still mostly in ruins.

No foreign investors have come to rebuild the empty factories, and only a handful of hardy Afghan businessmen have taken the plunge, setting up small operations that employ a few hundred workers - in a city with tens of thousands of unemployed adults - to make marble tiles, fiberglass bathtubs and plastic hoses.

"All my friends tell me I have made a mistake, but I think they are wrong. This is the time to invest," said Shah Agha, who invested $200,000 in a marble factory and now employs 150 people. "Last year I was the only one here. Now there are three or four more, but we have too many problems. The electricity goes off and the machines stop. People like me want to help rebuild Afghanistan, but we need to do a good business too."

The only major national development project underway - the repaving of the central highway from Kabul to the southern city of Kandahar – is being financed by grants from the United States. The only major businesses to open here have been two cellular phone companies, although two luxury hotels are planned and several foreign banks are expected to open branches soon.

Although the Afghan government is desperately trying to attract serious foreign investment, the obstacles are so numerous that they would make even the most patriotic millionaire think twice. First, the infrastructure is in terrible condition. Electrical power fails constantly, roads are potholed, and vacant urban land is unavailable because of title disputes, cronyism and lack of water. Second, the Afghan bureaucracy is an impenetrable maze of red tape, best navigated with connections and cash. Until recently, obtaining a business licence required completing 40 separate approvals from various agencies, often accompanied by requests for kickbacks. In the past 18 months dozens of eager potential investors, especially wealthy Afghan exiles, have abandoned projects in disgust after being beaten down by the bureaucracy.

Security is a chronic concern for investors, and conditions in Afghanistan have been deteriorating markedly in recent months. Resurgent Taliban forces and other anti-government groups have mounted repeated armed attacks, and feuding Afghan militia leaders continue to fight among themselves. Kabul remains relatively safe, but even here the business community's nerves have gotten noticeably jumpier.

Finally, there is the problem of official mixed signals. Although the government enacted an investment law with numerous incentives for commercial ventures, it has retained tight control over the lucrative telecommunications, mining and industrial sectors. And while the finance and commerce ministers are free-market advocates, other officials in the coalition government are old-school statists with entrenched bureaucratic interests to protect.

"People are very motivated, but they get encouraged by one ministry and stopped by another. There is no coordination on a larger scale," complained Mahmoud Karzai, an Afghan-American businessman and brother of Afghan President Hamid Karzai, who has been promoting a joint chamber of commerce here. The licensing controls on manufacturing and communications, he said, are especially daunting. "That's where the real money and real potential are. The rest is small potatoes."

Afghan officials said they are keenly aware of the barriers to investing and are determined to break them down. This month the government will open a "one-stop shop" for potential investors, a computerised office with a single, short business application form and English-speaking staffers who can help investors find their way through the bureaucracy and even waive onerous procedures, such as checking for outstanding debts with long-defunct banks.
In some areas of the economy, impatient local entrepreneurs are literally lighting their own way. Electricity may be erratic, but the capital is illuminated thanks to thousands of imported Japanese and Korean generators – a lucrative cottage industry in itself. Stores selling TV sets and other electronic entertainment, once banned by the Taliban, fill an entire street.

Colourful lights

At night new restaurants and wedding salons beckon with displays of multicoloured lights.

And if commercial and industrial development are lagging, residential building is on a roll. In some neighbourhoods, entire blocks are being torn down and rebuilt by returned wealthy exiles or profit-minded landlords. Among the biggest-selling items in Kabul these days are modern bathroom fixtures, which arrive in trucks from Iran and Pakistan protectively wrapped in straw.

Mohamedullah Nasir, an energetic young man whose family imported tea and foodstuff during the Taliban years, now presides over a thriving empire of home-construction products, from flooring tiles to chrome faucets. Most of his materials are imported, but several months ago he decided to open a small factory to make sinks, tubs and chairs out of moulded glass-fibre.

"Eighty per cent of our business is residential, and it has increased 80 per cent in the last year," Nasir said. Although he has kept his own family in Pakistan until he is more confident of security conditions here, he has begun bringing in Pakistani masons and other workers because, after two decades of c