OPIC-Funded American Investors Create Jobs and Build

UNCLAS SECTION 01 OF 02 KABUL 003962 SIPDIS SENSITIVE DEPT FOR S/SRAP, S/GWI, SCA/FO, SCA/A, AND EEB/CBA DEPT PASS USAID FOR AID/ANE DEPT PASS USTR FOR DELANEY AND DEANGELIS DEPT PASS OPIC FOR CONSTANTZ AND BEQUAI DEPT PASS TDA FOR STEIN AND GREENIP TREASURY FOR JCASAL, ABAUKOL, AWELLER, AND MNUGENT COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH E.O. 12958; N/A TAGS: BEXP EINV EAGR KWMN AF SUBJECT: OPIC-Funded American Investors Create Jobs and Build Capacity KABUL 00003962 001.2 OF 002 ¶1. (U) Summary: Capitalizing on "Afghan First" opportunities that promote local employment, U.S. investors in Afghanistan are training and employing thousands of Afghans, including women, while building capacity in numerous sectors. OPIC-funded U.S. companies have registered successes in the apparel industry, beverage production and cold storage-frozen chicken imports. Investors have overcome human resource challenges in these enterprises by offering extensive training, transportation, meals and other benefits that, in turn, have paid off with low turnover rates. Moreover, risk-savvy investors find that by providing their own security and power, they are able to keep production constant and costs down. End Summary. ¶2. (U) Overseas Private Investment Corporation (OPIC) Director of Portfolio Management Mary Ryan Bequai and Senior Investment Officer Jeffrey Constantz visited Kabul December 1-3 to monitor the progress of ongoing OPIC projects. The following vignettes provide a snapshot of private investment successes in Afghanistan across various sectors. SAFI APPAREL - TRAINING AND EMPLOYING WOMEN IN KABUL - - - - - - - - - - - - - - - - - - - - - - - - - - ¶3. (U) Established in 2005, Safi Apparel has developed a growing manufacturing business known for high quality products. The company has a long-term contract, through the U.S. Department of Defense (DOD),to provide the Afghan National Army (ANA) and the Afghan National Police (ANP) with 14,000 uniforms per month. Currently, the Safi factory is producing only 2,000 uniforms per month, with the remainder subcontracted to a local manufacturer. Safi hopes to build enough capacity to fill the orders independently within two years. The factory was established with the intention of exporting manufactured goods to Europe, however, the ANA and ANP contracts proved to be much more profitable. (Note: Safi Apparel is not related to Safi Airlines.) ¶4. (U) Creating a safe training and working environment for Afghan women was one of Safi Apparel's primary goals. Currently approximately 130 women and ten men work in the plant. The company sent ten of the women to India for training two years ago and all ten are now working as supervisors for the company. According to the plant's managing director, the company's goal is to hire and train 25 to 30 new women every two months until it reaches a full capacity of 300 female employees. He also claimed there has been less than one percent attrition since 2005. ¶5. (U) During a recent visit, factory standards appeared to be high - the new facility was well lit and heated, clean and sufficiently equipped. The women told Econoff their families were comfortable with their working situation and said some had even visited the facility to check on the security situation. Safi provides transportation to the factory and a hot lunch for employees in a well-maintained cafeteria. The company is looking for assistance to open an on-site day care facility for approximately 100 of the employees' children. EVIAN OF THE EAST - - - - - - - - - ¶6. (U) In 2004, OPIC invested almost $10 million in Afghanistan Beverage Industry (ABI) originally a juice/water/soft drink production facility in Kabul. Since that time OPIC's investment has nearly doubled and the expanded plant now focuses solely on water bottling. According to the South African plant manager, the company now employs ten ex-pats and nearly 250 Afghans, many in managerial positions. He stated that 95 percent of its product is purchased by DOD through its contractor Supreme Food Services. ABI has been so successful that it has purchased a second, faster production line and is considering a third based on projected DOD demand increase. ¶7. (SBU) An Afghan line supervisor who has been with the company since 2004 told Econoff that people approach him regularly about jobs at the plant because of its good reputation. Employees are well paid and proud of the product they produce in this high-tech facility, he stated. The company provides perks such as free transportation and food for all employees as well as a Mosque on the compound. ABI's Afghan mechanic workforce are trained both domestically and abroad to maintain and repair the German machinery on-site. This investment in training is paying off with near self-sufficiency in equipment maintenance and reduced repair costs, KABUL 00003962 002.2 OF 002 the supervisor noted. According to OPIC representatives, the project has been so successful that ABI is ahead on its loan payments. OPIC FUNDS LARGEST COLD AND DRY STORAGE FACILITY IN COUNTRY - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ¶8. (U) Afghanistan has a severe shortage of cold storage facilities for foodstuffs. OPIC recently funded the construction of a multi-million dollar cold and dry storage unit in Kabul to address this issue. The project is the brainchild of the owner of Summit Associates, a frozen Halal chicken importer and distributor with prior OPIC funding. The company's owner discovered that lack of cold storage was stifling the growth potential of his and many other food-processing businesses. To remove that obstacle, he is building cold storage facilities in Kabul and Herat, where he has established multiple chicken retail outlets. While the majority of the cold storage will be used to support the owner's frozen chicken import business, dry storage space could be rented to support local demand or converted into cool or cold storage areas. The state-of-the-art facility, located near Kabul International Airport, will be a self-contained secure establishment powered completely by diesel generators. The facility is approximately 20 percent completed and will serve as a prototype throughout Afghanistan once completed. COMMENT - - - - ¶9. (SBU) These OPIC investments highlight the human resource challenges faced in starting a company in Afghanistan, as well as the patience and hard work necessary to overcome them. Nevertheless, these companies are doing well, despite the difficulties. Although they are partially or fully American owned, they fit the spirit of "Afghan First," because they train and employ thousands of Afghan men and women, build capacity, and demonstrate how modern production technology can be applied in the country's emerging private sector. OPIC funds numerous ventures in the country, has committed more than $200 million since 2004, and remains on track to commit nearly another $100 million in 2010. Of course, Afghanistan remains a risky investment venue. We will continue to monitor these and other investments to distill best practices on how to do business in Afghanistan. RICCIARDONE