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TRADE cover story

AFGHANISTAN Seeking new highs As attempts to stand on its own feet, its wealthy diaspora in Dubai could play an important role in any recovery

by Jennifer Gnana money and fled to countries like the ‘In [email protected] UAE to start new lives. Haji SaderKhail, who Afghanistan, N a cool November heads the Business Council - until now, the evening, on a patch of Dubai, says that in fact the migration manicured grass in Dubai’s began much before that, during the time security is not Creek area far away from of the Soviet invasion of Afghanistan, good. Business the rugged which began in the late seventies and people live in Dubai with Omountains, a group of Afghan immi- lasted a decade. grants sing songs in and , While low-income flock to their families and do cherishing memories of a Middle Eastern capitals such as Dubai long-ravaged by war and conflict. and in search of odd jobs, their business in Afghanistan. A little further away in the city’s wealthy countrymen have invested I go sometimes in the textile souk more Afghans can be significantly in real estate and other found selling dresses and shawls richly business. morning and return embroidered in traditional patterns Afghan real estate buyers spent $60 to Dubai at night’ worn by their women, while others million on property in Dubai in the SaderKhail, Afghan Business lounge on cushions sharing and first six months of 2012, a 27 per Council - Dubai chatting away over cups of chai. cent year-on-year increase, according The UAE was home to around 300,000 to the emirate’s government figures. Afghans as of 2012, making it the A report at the time noted the UAE, using Dubai’s reputation as a impoverished country’s second largest that some investors from Afghanistan logistics hub to trade traditional after the . were spending up to Dhs20 million products such as dried fruits, nuts, and Since the onset of the US and NATO-led ($5.4 million) on “real estate shopping Karakul wool with the rest of the world. 2001 war against the theocratic regime sprees”, including in some of the most While more recent figures are unavail- led by the Islamic fundamentalist expensive Dubai developments such as able, the Afghanistan Business Council , many Afghans have sold what The Palm. - Dubai says two-way trade between assets they had, and have taken their Then there are the entrepreneurs in Afghanistan and the UAE grew three- 8 the gulf | December 2014 25 cover story TRADE TRADE cover story

8 fold from Dhs1.32 billion ($360 million) mainly consists of a robust mix of ‘The challenge in 2007 to Dhs4.15 billion in 2009. business, those visiting friends and SaderKhail is an example of an relatives, UN officials, diplomats and for Afghanistan Afghan entrepreneur who has chosen corporate customers,” he adds. today is to to make Dubai his business home. Budget carriers such as Having inherited a sugar and cooking and Sharjah-based Air Arabia also comply with oil business from his father, and later fly from their UAE hubs to , global food expanding it to include the transport while -based Etihad Airways of fuel supplies to Afghanistan from has a codeshare agreement with security standards so that , he now has two offices in the Afghanistan’s . its produce can be graded city, plus one in and four in his While Afghan investment in UAE homeland. real estate is well known, it is not and prove competitive It is not entirely difficult to understand all one-way traffic. Emirati companies in regional markets’ why he has chosen to base himself in have, albeit rather tentatively, taken the McNamara, Purdue University business-friendly Dubai. The US was plunge in Afghanistan in recent years. due to pull out almost all of its nearly Telecoms provider was one of 10,000 combat troops from Afghanistan the companies that rushed to provide September 2014 for the Afghanistan by the end of this year, but just last basic communications infrastructure to Oil Conference, where the potential of month reversed the decision, citing the devastated country in 2007, and is the Central Asian country’s nascent growing attacks by the Taliban. now present in more than 34 provinc- oil sector was highlighted. In materi- Afghanistan remains highly unsafe, es, supporting more than 200 Afghan al promoting the conference, Ahmad whether for citizens, aid workers, districts and 12,000 retail outlets. Rateb Popal, chairman of Afghan journalists or business people. Late The UAE’s outreach to Afghanistan conglomerate Watan Group, said there last month around 45 spectators who has not always been as high profile, was “a sense of urgency” about the had gathered to watch a volleyball and current economic initiatives follow moment. match in the east of the country were earlier humanitarian efforts by the “Afghanistan stands now at the killed by a suicide bomber following wealthy Gulf state. Following the US gateway connecting east to west and the announcement of the US troop invasion of Afghanistan in 2001, the north to south, with the potential extension. UAE maintained a secretive, low-profile to harness and transfer vast natural The Kabul is, however, ground presence in the country, aiding resources of its own and its neighbours, only three hours’ flight from Dubai - the allied forces in their mission to win which have yet remained undeveloped, close enough to maintain good business over the “hearts and minds” of the to the large markets of the region and links. Afghan people. Being fellow , around the world,” he wrote. “We have very good air connectiv- the UAE troops reached out with The country’s rugged terrain may ity with eleven flights from Dubai to religion, often praying with Afghan be home to nearly $1 trillion-worth Afghanistan [every day] and this is villagers and mingling with them to of mineral deposits, including iron, very easy for our business people,” find out their pressing developmental , cobalt, gold as well as industrial says SaderKhail. “In Afghanistan, until needs. metals such as lithium. It also claims now, the security is not good. Business Afghanistan was the recipient of 14 per Making connections: UAE telecoms company Etisalat has provided infrastructure to Afghanistan to have sufficient reserves of crude oil people live in Dubai with their families cent of the UAE’s foreign aid in 2009, to satisfy its domestic needs, besides and do business in Afghanistan. I go contributing Dhs1.26 billion, mainly in ‘There is capital “I think it has to do with risk tolerance. withdrawing combat troops and the some gas. sometimes in the morning and return the forms of grants channeled through A lot of regional companies will opt for increasing involvement of private It is estimated that there are reserves to Dubai at night.” the Abu Dhabi Fund for Development. flight from a lower profile in Afghanistan and might security firms. of 1.6 billion barrels of crude oil, , which flies between Dubai The UAE also pledged $250 million Kabul to Dubai not choose to take on our standard of “In villages, most of the society and 16 trillion cubic feet of gas and 500 and Kabul seven times a week, says it for reconstruction projects in Kabul and security, so that might be part of it.” culture is controlled by the people million barrels of natural gas liquids, has carried more than 112,000 passen- other provinces in 2011. but it could Another plausible explanation goes themselves. They don’t go to the govern- according to a joint assessment by the gers on the route since it began in While goodwill towards the UAE has go back from back to the “hearts and minds” ment when they have disputes, they US Geological Survey and its Afghan December last year. The says, been in plentiful supply on the ground campaign waged by UAE forces in just go to the elders, and they resolve counterpart, reported British daily The among other things, the air link has in Afghanistan, will it translate into Dubai to Kabul because Afghanistan. It is believed that UAE it in the family, in the tribal system. It Telegraph. helped stimulate bilateral business ties. fresh investments from the Gulf in an of a higher rate of return businesses seek security by engaging works very well,” he explains. For now, however, these vast natural “The connections we provide make it ever changing security context? with tribal leaders rather than through “We should support that system more resources remain locked in the ground, easier for firms to invest in Afghanistan, Richard Phillips, chief of staff at on investment because western security firms, who are often and not change it into a modern police and Afghanistan remains one of the creating a favourable environment for risk management firm Edinburgh Afghanistan will have that viewed antagonistically by the locals. state.” world’s poorest, least developed further growth,” says Sheikh Majid International, which is headquartered in Afghan American economist Nake But given Afghanistan’s conflict nations. Resource exploitation cannot al Mualla, the airline’s divisional Dubai with a Kabul regional office, says for investors from Dubai’ Kamrany, who teaches at the University history and security risks, what is in it come quickly enough to improve senior vice president for commercial he hasn’t seen a significant increase Nake Kamrany, University of Southern California, explains the for UAE businesses and entrepreneurs? the quality of lives of many ordinary operations. in Emirati companies seeking security of Southern California necessity of developing strong tribal Diplomats, energy executives and Afghans - but the country will need “The demographic on the route coverage for their firms in Afghanistan. networks especially in the context of ministers convened in Dubai in technical and commercial expertise. 8

26 December 2014 | the gulf the gulf | December 2014 27 cover story TRADE

8 That is where UAE companies could step in. Dubai-based Dragon Oil is heading a consortium of Turkish Petroleum Corporation and the Afghan Ghazanfar Group - in which Dragon holds a 40 per cent stake - which won a bid to develop the Sanduqli and Mazar-e-Sharif oil blocks in the Afghan-Tajik basin in November 2012. Afghanistan will also hope its agricul- ture sector, which contributes between 20 and 25 per cent of economic output, can play a role in future relations with the UAE and wider Middle East. But in doing so it will have to address the problem of the illicit growth of opium, which has accelerated since the fall of the Taliban regime. The country is estimated to supply 90 per cent of the world’s illicit opiates, with the value of this year’s crop estimated at $850 million, according to the UN Office on Drugs and Crimes (UNODC). Kevin McNamara, a professor and agricultural Afghan president Ashraf Ghani Ahmadzai (left) has pledged to stimulate the country’s private sector economist at Purdue University in the US, puts the value of illicit agricultural ‘The new president Ashraf capitalists who have made their money exports at $400 million, a hard habit for overseas will return to the homeland to the Afghan economy to kick. Ghani is trying to create make a fresh start. McNamara says the challenge for employment for half a For SaderKhail, a diary full of business Afghanistan today is to comply with matchmaking events in Washington global food security standards so that million people because and Dubai to open doors for foreign its produce can be graded and be more the unemployment rate investment to his country suggests he competitive in regional markets. is in no hurry to return permanently. “The Middle East is an excellent in Afghanistan is very Kamrany says that the Afghan diaspora market for Afghanistan, but it is pretty high at over 40 per cent’ will continue to look at stable Dubai as demanding,” he says. “A lot of fresh and a means to re-establish themselves in Nake Kamrany, University dried fruits and nuts are making their Afghanistan. of Southern California way to Dubai to be exported or distrib- “It is very difficult to distinguish uted, but the issue of Afghanistan is between illicit money and legal money. whether the food meets basic phytosan- well as industries.” This is simply a market force and itary standards. Is it free of pathogens? Under his predecessor , market forces create opportunity in Does it meet quality standards? Is it free who was widely perceived to be corrupt Dubai, and as long as that opportunity of pesticide residues?” and nepotistic, Dubai became a reposi- exists it will continue,” he says. Economist Kamrany, who is looking tory for large amounts of illegal money “There is capital flight from Kabul to provide micro financing to enable which was invested in the emirate’s to Dubai but it could go back from Afghans to develop small enterprises, real estate boom. Dubai to Kabul because of a higher believes that a change in the Afghan The coincidental nearly billion dollar rate of return on investment because government earlier this year is cause for loss in 2011 of the Kabul Bank, in which Afghanistan will have that for investors much optimism. the Karzai family was heavily invested, from Dubai. “The new president Ashraf Ghani is revealed just how millions of dollars of “From Dubai, you have two sources of trying to create employment for half a often illicit money were channeled into funding - one is that Afghans themselves million people because the unemploy- Dubai property. who have parked a lot of money there ment rate in Afghanistan is very Now with uncertainty looming over and second is from investors in Dubai high at over 40 per cent,” he points Afghanistan’s future yet again, it and other countries. out. “Secondly, he’s trying to get the remains to be seen whether a second “They won’t go anywhere else, so private sector stimulated so that they phase of capital flight will begin into Dubai is going to expand its economic make investments and create jobs as the UAE, or whether expatriate Afghan relationship with Afghanistan.” <

28 December 2014 | the gulf