| | Investing in Afghanistan: A Hard Sell? The Wall Street Journal
06/29/2012
By Margherita Stancati
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Indian businessmen from sectors ranging from mining to education to tourism gathered in a packed hall of a New Delhi hotel on Thursday to figure out whether it makes sense to invest in war-wracked Afghanistan.
India’s foreign minister, industry leaders and top Afghan officials took the stage in turn to deliver the message that, despite concerns over security and political instability, Afghanistan is open for business – and this is the time to step in.
As the U.S. prepares to withdraw most of its forces by the end of 2014, Afghanistan is looking for ways to gradually reduce its dependence on foreign assistance.
India says it’s willing to help it become financially more self-reliant.
“Afghanistan may not be the easiest destination to sell to an investor but India has ventured to do exactly that,” India’s Minister S.M. Krishna said in his address.
He singled out Afghanistan’s mineral resources and the potential to make the country an energy hub connecting Central Asian countries and Iran to India and to other fast-growing emerging markets as areas of opportunity.
So far, Indian investment in Afghanistan has been led by state-owned Indian companies with a focus on natural resources.
A consortium of companies led by the state-run Steel Authority of India in November last year won the rights to a $14-billion iron ore project in the province of Bamiyan.
And a group of state-run Indian companies, including Hindustan Copper Ltd., is on a short-list to bid for four copper and gold projects around the country. Now, the Indian government is encouraging greater involvement of the private sector, which has shown some interest.
For a start, the event was organized by the Confederation of Indian Industry, a leading industrial body.
“We see Afghanistan today as a land of immense opportunity,” Chandrajit Banerjee, the director general of the CII, said in his opening remarks.
But there is more to India’s commercial drive in Afghanistan than a desire to seek out economic opportunities.
“The military draw-down should not result in a political or security vacuum that will be filled by extremists once again. There should be something productive in its place,” said Mr. Krishna. “We feel that foreign investment and domestic private sector development, both small and large scale, can play that role.”
Calling on Indian companies to invest in Afghanistan, he said India needs “to offer a narrative of opportunity to counter the anxiety of withdrawal, uncertainty, instability and foreign interference.”
Promoting Indian business in Afghanistan can be seen as part of a softer push to expand its influence in the country, something the U.S. has also encouraged it to do.
India sees this largely as a way of balancing Pakistan’s ambitions in Afghanistan and the Taliban in Afghanistan. New Delhi’s growing involvement in Afghanistan, particularly its training of local troops, has worried Islamabad, which sees Afghanistan as falling within its sphere of influence.
Analysts say Pakistan likely sees India’s greater commercial interests in Afghanistan in geopolitical terms, too.
At the investment summit, the Afghan pitch centered largely on the country’s vast and untapped natural resources, which include iron ore and copper.
Around 70% of the country’s territory is yet unexplored, the country’s mines minister said at the event.
In the near future, the Afghan government is hoping to attract tens of billions of U.S. dollars in foreign investment in these sectors, Hazrat Omar Zakhilwal, Afghanistan’s Minister of Finance, said on the sidelines of the event.
Other areas in which Afghan officials encouraged investment included infrastructure, cement manufacturing and the export of local goods like marble, carpets and saffron.
They also said Afghanistan is committed to making business transactions more transparent and to improve the existing regulatory system by looking at international best practices.
To assure potential investors, in his address Mr. Zakhilwal, played down security fears, saying the media exaggerates the risks.
“These concerns should be laid to rest,” he said, with reference to worries the security situation is going to deteriorate following the pull out of foreign forces.
But security is likely to remain a top concern for anyone considering doing business in Afghanistan. The U.S.-led coalition earlier this week said that insurgent attacks rose sharply in recent months.
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