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"Investors are like birds"

As foreign troops in Afghanistan rush for the exit, so are the country's businessmen.
24.04.2012  |  Kabul
A money dealer at Shahzada market in Kabul. (Photos: Rouyee)
A money dealer at Shahzada market in Kabul. (Photos: Rouyee)

When the Afghan president recently cursed the business elite of his country, he probably had people like Mukhtar in mind. "I hear that some businessmen are fleeing and moving their businesses to outside Afghanistan," Hamid Karzai said at a press conference in March. "Curses be upon such businessmen who made tons of money here and are fleeing now that the Americans are leaving. They can leave right now. We don’t need them.”

Mukhtar has invested five million dollar in his Kabul-based construction company since 2003, benefitting from a construction boom financed by foreign aid and drug money. But in the past few months he has slowed down his business and moved some two million dollars out of the country. And more is to follow.      

"Investing in the country means a great service to the people, but I cannot continue investing, given the unclear future ahead," says the man dressed in a Western suit and tie. When the foreign troops withdraw from Afghanistan, the majority of investors will leave the country, too," he predicts. 

Suitcases fill of banknotes

The numbers seem to prove him right. According to the Central Bank of Afghanistan the amount of officially declared money flown out of Kabul airport doubled to 4.6 billion dollars last year. The unreported amount is believed to be much higher. In March, Central Bank governor Noorullah Delawari moved to stem the tide. A new rule restricts passengers to carrying a maximum of 20,000 dollars in their baggage.

But on the quiet, money dealers in Kabul's Shahzada market say that there are many ways to circumvent the limitation, including bribes to officials at Kabul airport. Another option is to use Hawala, an informal Islamic money transfer system. Despite attempts to regulate it, there are still possibilities to send money under other people's names.   

Memories of economic collapse in the 1980s are still fresh

It is memories of the turmoil in the 1980 and 1990s that are driving the business out, says Khan Jan Alkozai, the deputy head of the Afghan Chamber of Commerce. "Investors have experienced looting during the regimes of the Taliban and the mujahedeen. Heavy losses have been inflicted on them during the civil war. They are concerned that this could happen again." But, he says, the new strategic partnership between Afghanistan and the United States will restore some confidence. 

According to Alkozai, in recent years some four to five billion dollars have been invested by Afghans in Dubai alone, much of it in real estate. Some members of the chamber have also managed to build partnerships with companies in Iran and Pakistan, he says, adding: "Investors are like birds, they settle wherever there are good trees and an appropriate environment." 

Between 2003 and 2006, the trees in Afghanistan were greenest. Around six billion dollars were invested by Afghan businessmen in this period, Alkozai says. The country saw the formation of more than 20,000 new companies. But hopes for the future faded steadily after the resurgence of the Taliban since 2006. 

The dollar is in great demand, as faith in Afghanistan's future is tested. 

Construction business sees dramatic decline 

Foreign investment has also decreased sharply since the date for the withdrawal of foreign troops was announced in 2009. The start of the withdrawal has been a big concern for foreign investors and few of them are willing to stay in Afghanistan beyond 2014, says Rohullah Ahmadzai, the head of the Afghanistan Investment Support Agency. The decrease of investment in the once booming construction industry is particularly dramatic, he says. 

The recent cash flight has been so immense that some money dealers at Kabul's Shahzada market say that it has affected the dollar rate in the country. "Since investors have started buying dollars, the price of dollar has increased steadily," says money dealer Hasib, whose company has offices in seven countries. Since spring 2011, the rate has increased by about ten per cent. The dollar is the main currency in which the money is being moved abroad.   

Real estate prices in Kabul have also plummeted as many owners are trying to realise their gains and shift their assets abroad. Hasib says many of his customers have sold their properties. But, he stresses, a lot of dollars are still coming the other way: Afghans living abroad are sending money to their families at home.  

The main destinations for transferring money abroad are Dubai for business purposes and Greece to support relatives who have fled Afghanistan and are trying to establish themselves in Europe, Hasib says. 

It seems many Afghan families are thinking just like the country's investors: In the absence of a secure future, they are now busy setting up a foothold abroad.