Identifier
Created
Classification
Origin
06KABUL938
2006-03-05 09:34:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kabul
Cable title:  

AMERICAN BUSINESSES IN AFGHANISTAN: HERAT PROVINCE

Tags:  ECON ETRD EFIN PREL OPIC EAID PGOV AF 
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VZCZCXRO8130
RR RUEHDBU RUEHIK RUEHYG
DE RUEHBUL #0938/01 0640934
ZNR UUUUU ZZH
R 050934Z MAR 06
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 8681
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 6816
RUEHIL/AMEMBASSY ISLAMABAD 2849
RUEKJCS/OSD WASHDC
RUEKJCS/JOINT STAFF WASHDC
RHMFISS/CDR USCENTCOM MACDILL AFB FL
RUCNDT/USMISSION USUN NEW YORK 2289
RUEHGV/USMISSION GENEVA 5639
RUEHUNV/USMISSION UNVIE VIENNA 1134
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 03 KABUL 000938 

SIPDIS

DEPARTMENT FOR SA/FO, SA/A, EB
TREASURY FOR PARAMESWARAN
NSC FOR AHARRIMAN, KAMEND
CJTF-76 FOR POLAD, CENTCOM FOR CG CFC-A
COMMERCE FOR AADLER
USTDA FOR DSTEIN, SGREENIP

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: ECON ETRD EFIN PREL OPIC EAID PGOV AF
SUBJECT: AMERICAN BUSINESSES IN AFGHANISTAN: HERAT PROVINCE

REF: 05 KABUL 3095

UNCLAS SECTION 01 OF 03 KABUL 000938

SIPDIS

DEPARTMENT FOR SA/FO, SA/A, EB
TREASURY FOR PARAMESWARAN
NSC FOR AHARRIMAN, KAMEND
CJTF-76 FOR POLAD, CENTCOM FOR CG CFC-A
COMMERCE FOR AADLER
USTDA FOR DSTEIN, SGREENIP

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: ECON ETRD EFIN PREL OPIC EAID PGOV AF
SUBJECT: AMERICAN BUSINESSES IN AFGHANISTAN: HERAT PROVINCE

REF: 05 KABUL 3095


1. (U) Summary: Although Herat is Afghanistans second
largest commercial center, it remains remote for Western
businesses operating in Afghanistan. The few foreign
companies present are primarily small traders, including
two U.S. firms offering groceries and frozen chicken and
eggs. This is the first in a series of reporting cables on
U.S.-owned businesses operating in Afghanistan and on the
business climate in Herat. End summary.


2. (U) While the number of foreign firms registered to do
business in Afghanistan grows every month, few companies
have yet ventured outside of Kabul. Herat is one of
Afghanistans major economic centers (reftel.) However, it
remains, in the words of a local business consultant too
far a-field for Western companies.


3. (U) Herat possesses a solid manufacturing base
concentrated in the Herat Industrial Zone. Despite being
half Kabuls size, the city is more commercially vibrant,
due largely to its proximity to Iran and relatively stable
power supply (provided by Iran and Turkmenistan.) Yet very
few foreign-owned companies (primarily Iranian, Turkish and
Central-Asian) have set-up operations. One small scale and
and
one medium scale U.S.-owned commercial enterprise are
profiled below; they are illustrative of the type of U.S.-
owned businesses braving Afghanistans Western frontier.

--------------
Jacubs Grocery
--------------


4. (U) Herats first Western-style grocery store opened in
September 2005 and business is booming. Located on a busy
downtown street, the store is well-stocked with American,
European and Iranian products in self-serve refrigerators
and freezers. Owner Jacub returned to Afghanistan from
Freemont, California, where he lived for over a quarter

century. In his New York Yankees cap and warm-up suit,
Jacub admitted that he has not yet been able to blend back
into his native culture. His first venture, an internet
cafe, failed due to lack of clientele and a poor network
connection. The grocery, however, is prospering. Almost
all his customers are foreign staff of international
organizations operating in Herat. Jacub offers 24-hour
ur
service and claims he can procure almost anything upon
request. One of the customers in the shop who has lived in
Herat for three years told Econoff that most of the goods
on sale arent available anywhere else in the city.


5. (SBU) Prices of American and European products, such as
cereal, sauces, soft drinks, snack foods and toiletries,
are extremely low. A 14 ounce bottle of Gatorade that
retails in the U.S. for USD 1.50 was selling for 20 Afs
(approximately 40 cents.) Jacub explained that the
wholesale price is just 5 Afs (10 cents) at the bazaar
outside of the large Bagram Air Force Base north of Kabul.
Bagram has a healthy informal market just beyond the wire,
and many of the products sold there appear to be from
shipments destined for the PX that fell off trucks.


6. (SBU) Jacub supplements his Bagram purchases with goods
procured in Pakistan and Iran. He makes bimonthly trips to
Iran where he buys six suitcases worth of goods, primarily
ly
Iranian products purchased from wholesalers. Afghan

KABUL 00000938 002 OF 003


customs inspectors, he said, never search his vehicle or
inspect the packages. If they did, he is certain that a
tip of just one dollar would be enough for the inspectors
to look the other way. Goods purchased in Pakistan
destined for his shop arrive via more formal channels.
Jacub places a monthly order through a broker for a
container delivered to the Torkum border crossing. It is
then forwarded by truck to Herat.


7. (SBU) Jacub acknowledges his business is built on extra-
legal activities and claims to have plans to establish a
more legitimate supply chain by ordering regular containers
from Dubai. He also plans to open a restaurant on the
second floor of his grocery to be called HFC - Herat Fried
Chicken which will also cater to expatriates.

--------------
Summit
--------------


8. (SBU) Summit is owned by a Long Island-based businessman
and distributes frozen chicken and eggs. Summit began its
Afghan operations in 2002 when it shipped its first
t
container load of frozen chicken from Arkansas and South
Carolina to Afghanistan via Iran to Herat. (Note: U.S.
Department of Treasury regulations prohibit U.S. companies
from engaging in transshipment through Iran. End note.)
Since late 2004, Summits sales have increased three-fold
and the company has set up a permanent facility in Herat.
In mid-2005, Summit obtained an Afghan business license,
leased land at the Herat Industrial Park, and built a cold
storage facility. Two recently installed freezer units,
the only cold storage in the industrial park, are now
stacked floor to ceiling with frozen chicken. The warehouse
boasts thousands of cartons of American eggs destined for
distribution across the country. Summit reportedly imports
twenty 40-foot containers each month.


9. (SBU) Company representatives stated that while about
half of their product arrives via Pakistan, this route has
proved disastrous on many occasions as perishable cargo
go
spoiled while the company haggled for its release from
customs. Summits representative admitted that while
shipment of their product via Iran is hardly ideal,
predictable problems (i.e. request for bribes) at the
border at Islam Qala is, for now, preferable to the
tyranny at the Pakistani border.


10. (U) Summit has two small shops in Herat, but
distributes the bulk of its products to retailers in Kabul,
Jalalabad, Mazar-e-Sharif and Kandahar. The company has
also applied for a space in the Bagrami Industrial Park in
Kabul (currently fully occupied but slated for possible
expansion) and plans to build additional cold storage units
both for use in the further expansion of their business and
for lease to fresh fruit vendors.

--------------
COMMENT
--------------


11. (SBU) While there may be more impressive examples of
foreign direct investment in Afghanistan, these two U.S.
companies illustrate the nature of and challenges faced by
foreign-owned businesses willing to venture into
into
Afghanistans Wild West, a challenging environment that

KABUL 00000938 003 OF 003


in the last few months has been further complicated by
political and sectarian divisions (septel.) These
entrepreneurs have learned to deal with, and even rely on,
the Afghan bureaucracy. Although currently dependent on
shady practices, both businesses recognize the need to
legitimatize their operations as they expand. Though
insignificant on a macroeconomic scale, the presence of any
foreign-owned businesses in Herat is an encouraging sign.

NEUMANN