July 25, 2014 11:37 am

Afghanistan: open for business?

Despite political instability and setbacks, the new generation of entrepreneurs is still betting on the country’s future
Sayed Khalid, a co-founder of Kardan University, on its roof in Kabul©Joël van Houdt

Sayed Khalid, a co-founder of Kardan University, on its roof in Kabul

It took two weeks for Sayed Khalid’s family to walk 225km from Kabul to Peshawar – and almost 20 years for him to get back. Now the one-time child Afghan refugee soars high in his country’s business life, one of a generation of returnee entrepreneurial galácticos to have emerged since the US and its allies ousted the Taliban in 2001. The 34-year-old Khalid sells satellite communications equipment in this still lightly connected country and has co-founded a private university offering a pioneering MBA course. Like other young executives in industries from media to information technology, he has prospered amid the relative stability and billions of dollars of international aid money that have flowed through during the past 13 years. There’s just one problem: the good times might be about to end.

“If I see the situation getting worse, I only have one option: to migrate to another country,” Khalid says, referring to the future after a withdrawal of western troops that will leave at most only a small support force by the end of the year. “To be honest, I don’t know what we will do if this international pullout happens and money is limited. That will be a big turmoil.”

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Khalid’s warning looked especially prescient as Afghanistan’s June 14 presidential election run-off between Abdullah Abdullah and Ashraf Ghani Ahmadzai lurched to the brink of collapse this month, amid allegations of massive fraud. Abdullah, a dapper ophthalmologist and prominent former member of the Northern Alliance that helped the US oust the Taliban, rejected a decisive defeat dealt him by preliminary official results published on July 7. The dispute over what was meant to be the country’s first democratic handover of power deepened as Abdullah’s supporters called on him to launch a parallel government. The country’s national election commission acknowledged fraud and launched an investigation into results from almost a third of the country’s polling stations.

As fresh violence threatened to engulf Afghanistan, John Kerry, US secretary of state, made an emergency visit to Kabul and warned the US would withdraw security and financial support to the country should anyone try to grab power. An intense weekend of talks ended with a deal for an audit of all eight million votes. At a July 12 press conference to announce the agreement, Ghani, an anthropologist and former World Bank technocrat who scored more than 56 per cent of the vote in the preliminary count, kissed Abdullah on the cheek as a symbol of at least temporary reconciliation. A few days later, a car bomb killed scores of people in a market in eastern Afghanistan, the latest reminder of the everyday risks in a country still in the grip of a Taliban insurgency.

As the battle over power rages, a less publicised but just as crucial struggle is playing out over the economy. The past 13 years may have been violent and uncertain but they have also inflated a commercial bubble never before seen in a country laid low for decades by civil war, foreign occupation and authoritarian rule. Per capita income has more than doubled in a decade (albeit from a pitifully low base) as foreign money has washed through the country, during a conflict and reconstruction period on which the US alone has spent hundreds of billions of dollars. That bath of money is now draining, with the US Congress voting this year to halve the annual civilian aid budget. The question is how many companies will be washed away with it.

The past 13 years may have been violent but they inflated an unprecedented commercial bubble

Sayed Khalid’s journey to the peaks of Afghan business began with his family’s escape from Afghanistan in 1984, when he was just four. In his buzzy office building in northwest Kabul, Khalid tells me how his father and other male relatives decided to leave and oppose the Soviet Union occupation launched more than four years earlier. While Khalid is too young to remember the trek to Pakistan, he recounts vividly family stories of a journey plagued by fear, robbery and desperation. His mother even picked up a baby boy about to be abandoned by his mother, handing the child over to his grandfather on the Pakistan side of the border.

Khalid’s family ended up in Peshawar, where his father helped supply other refugees with items from chickens to carpets. Khalid’s parents pushed him to go to school, following his two sisters. He worked part-time in a bakery before his big break came with a job teaching at a French-funded school for the massive refugee population. It meant leaving the house at 6am and teaching alternate segregated boys and girls classes into the evening, but the salary of up to $250 a month – a considerable sum – was a big draw. “It was too tough,” Khalid recalls. “It was for two years and that really made me mature.”

Like other refugees, Khalid came back to Afghanistan after the US invasion, attracted by the story of renewal being spun by local politicians and western countries. On his return, he and three friends decided to start a private university with just $100 of capital each. They figured correctly that a state education system in near-ruin through lack of resources and Taliban hostility, including a ban on girls going to school, would soon be overwhelmed by demand. The new Kardan University was born in a room in the Microrayon, the concrete Soviet-era apartment blocks whose solid if drab construction made them something of a des res in war-racked Kabul.

Now Kardan University has a purpose-built main campus in the centre of the capital, from where it has a view of the cluster of houses clinging dramatically to the sides of a small mountain named “TV Hill” because of the broadcast antennas peppering its top. When I visit, the university is putting the finishing touches to its new MBA programme area. Bundles of wires and plaster litter the floor, although the teacups are already laid out in the faculty room.

The institution has about 8,000 students on bachelors courses, of whom almost 30 per cent are women. By Khalid’s admission, this is an elite university rather than one attracting the many poor people in rural areas: in Afghanistan security and economic opportunity often fall away precipitously beyond city limits. An 18-month MBA course costs $4,800 – or about seven years’ income for the average Afghan. Khalid says most students are “high citizens”, including politicians, civil servants and staff at the city’s heavily fortified embassies and UN compound.

Mahmood Dastagir, Kardan University’s vice-chancellor, reels off the institution’s achievements. These include – in a first for Afghanistan – the publication in academic journals of articles on computer science and business administration. Kardan is looking at possible collaborations with universities in Pakistan, Cyprus, India, Thailand and France, while its 250-place MBA course is several times oversubscribed.

Relaxed and confident in his open-necked check shirt and slip-on shoes, Dastagir concludes his expansionist talk by showing me out through reception. It’s a portable building: a reminder, amid the ambition, of the fragility of things in a country fought over by foreign powers since at least the days of Alexander the Great. “These are the whole facilities we have got here,” Dastagir explains. “With limited resources, this is what we are trying to do.”

. . .

Entrepreneurs are betting on the durability of trends such as soaring school enrolment, social media use and a gradual cultural opening

Elsewhere in a capital that inevitably dominates the country’s commercial life, other Afghan business returnees have built even bigger empires and made still greater punts on the future. They’re betting on the durability of trends such as soaring school enrolment rates, social media use and – at least in the cities – a gradual but tangible cultural opening. Afghanistan has risen to 128th in Reporters without Borders’ 180-country annual press freedom index, above Asian counterparts such as Thailand, India and Indonesia.

Probably the best-known Afghan businessman internationally is media magnate Saad Mohseni, whose work has broken new ground in areas from TV news to the establishment of the country’s first football premier league. After a spell as a stockbroker in Australia, Mohseni returned to Afghanistan after the fall of the Taliban to set up a business seeded by US aid money. Since then, he has become a distinctive figure with his shock of curly hair and his willingness to break taboos by bringing in female DJs and broadcasting Indian soaps deemed too racy by the government. Rupert Murdoch bought a stake in his Moby Group in 2012, and Mohseni has shown no signs of throttling back since.

Mohseni is also a great advocate for a country that has become a trope for chaos in the west. After we’ve met a couple of times, he chides me good-naturedly during an email chat for what he sees as an overly negative take in an FT piece I’ve written on Afghanistan’s prospects. It’s an understated retort to what he and others consider a prevailing pessimism about a young country that, for all its problems, has also been profoundly altered by the past 13 years, for good as well as bad. In his message, Mohseni echoes and extends to the whole country an ambivalent quote he’d given for the piece, after I asked him why he was optimistic about what was to come: “What choice do we have?”

. . .

For every success story like Mohseni, there are other companies dying away because of their failure to prepare for the tougher times now at hand. In offices on two floors just above Sayed Khalid’s, Farshid Ghyasi, founder of Netlinks, an information and communications technology business, notes how many businesses that took off quickly with easy aid money are starting to disappear. Some are stricken building contractors no longer given deals to build infrastructure on behalf of the US military or other foreign donors. The winding down of such projects has generated scores of legal complaints from angry Afghan subcontractors, according to the Afghan attorney-general’s office.

Ghyasi, a polyglot 33-year-old who studied in Japan and Malaysia, says he’s much better prepared than some of his bankrupt peers. While Netlinks, which provides IT packages such as employment management information systems to companies and other institutions, once had more foreign than local clients, overseas customers are now a small minority. Its volume of military contracts has more than halved.

Ghyasi tells the tale of Afghanistan’s two business worlds in an engaging double act with Javid Hamdard, a fellow Netlinks executive with whom he co-founded the iHub, the country’s largest network of information and communications technology professionals. While the two men don’t quite finish each other’s sentences, both seem to anticipate the other’s thoughts. Hamdard notes drily that one reason Netlinks has been able to navigate the country’s sometimes deadly web of official patronage and gangsterism is because its field is so technical. Politicians who might kill a rival for a fuel logistics contract wouldn’t know how to handle an information technology company. Ghyasi supplies the punchline. “Dumb people can’t do it,” he says. “Our expertise protects us.”

Afghans are used to extremes. They have been through this phase of history once, when the Soviets left

- Farshid Ghyasi

The pair say other people they know are less phlegmatic and have concluded Afghanistan will become too hot to handle again. They tell alternating stories of the growing numbers of rich Afghans who are preparing to run if necessary, on the proceeds of the years of plenty. One friend just bought $1.5m worth of land in Turkey, while an acquaintance has sunk millions into Florida properties and a Dubai transport company. “He has so much money he doesn’t know what to do with it,” says Ghyasi.

While others think about fleeing, Netlinks is investing for the long term. Earlier this year it bought 30 servers costing €5,000 each. Ghyasi says it’s a vote of confidence, although his historical comparison of the situation today to the time of the USSR’s withdrawal – which was followed by a civil war – isn’t wholly encouraging. “Afghans are used to extremes,” he shrugs. “They have been through this phase of history once, when the Soviets left.”

Across town, Ghyasi’s wife Maryam has another vantage point as president of Cresco Solution, a recruitment company that is a sister company to Netlinks. Characteristically in a city where development has sprouted mostly in private spaces behind high walls, a muddy street gives on to a sophisticated interior, complete with clocking-in system for staff – and a warning to use it. Maryam, who has lived in Pakistan and Iran, is well aware of the unpredictability of Afghanistan and even thought of flying with her children to Dubai for the first round of the elections in April. But she also says she is confident in the performance of the US-trained Afghan security forces, whom some observers reckon are better tested than their Iraqi counterparts and – in theory – less likely to melt away in the face of a radical Islamist insurgency.

Some people don’t want to invest here for security reasons. But I am happy to invest in Afghanistan because this country needs to be built

- Maryam Ghyasi

Over a (pre-Ramadan) cup of tea in her office, Maryam tells how business has got tougher. More job seekers and employees are advertising but the number of positions on offer has shrunk because cutbacks to aid projects have reduced demand for staff from translators to office cleaners. Email scammers promising resettlement in the US, Australia and the UK have started targeting networked Afghans like the Ghyasis, although Maryam says she is committed to the country where everyone is “bored of war”. “Some people don’t want to invest in the country because of the situation and for security reasons,” Maryam says. “But I am more happy to invest in Afghanistan because this country needs to be built.”

The half-full, half-empty narrative of Afghan business has taken yet another twist thanks to the presidential election recount deal. Over email, Ghyasi acclaims an agreement that averted civil war and “gave a new life to all businesses, including ours”. Khalid also welcomes the news but is more cautious, noting the crisis prised open old ethnic divisions and was “moving to be a disaster as fast as a fire”, until the US and UN intervened.

Khalid is as good a spokesman as anyone for Afghan entrepreneurs’ battle between hope and despair. One moment he is deploring gothic levels of corruption, including demands by officials for bribes simply to pay your tax, or the rapacity of a governing class in which politicians wield power ruthlessly to serve their business interests. Yet in the next breath he is talking of the excitement of the opportunities and needs of a country that is full of new ideas as well as old fears.

While post-millennial Afghanistan has been a dangerous and unstable place by any standards, it has also been a haven for people like Khalid, at once unexpected and unreal. “What makes me confident is what we achieved in these 12 years,” reflects this once-itinerant entrepreneur who is about to see his faith in his refound home tested. “Now we just need a big shock to wake up.”

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Michael Peel is the FT’s Bangkok regional correspondent

Photographs: Joël van Houdt

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