Risk appetite

Traditional processes, low capital intensity,
but high value added and surprisingly
competitive

What level of risk appetite does an investor need to invest in Afghanistan? The immediate answer is something like "quite considerable".

It is hard for most western commentators and investors to understand how a country that has had so much support and guidance from the outside, languishes so low in pretty much all of the league tables. And all too easy for such people to feel like giving up and going home.

While Afghanistan is a risky location - and probably not where you would choose to put the whole of your investment fund - it would be very wrong to write it off.

If you are looking for a country that is modeled on World Bank templates of what is a "good" investment climate, then Afghanistan is not the place for you. A decade of western assistance has been countered by a decade of Afghan indifference or passive, but pretty effective, resistance to reform.

But opportunities are out there, investments have been made and business does go on. Check out the frenetic bazaars of Kabul and any major town or city if you want evidence.

A Darwinian style analysis helps to understand the situation. The investors and the businesses who are succeeding are those who can understand and adapt to the local investment climate. They find creative work-arounds, rather than wringing their hands. The ones who never make it in the first place, or have failed along the way, are those who devote energy to complaining, who lack evolutionary flexibility and instead expect the environment to transform into something more familiar and benign.

And of course, there are the parasites, made large and fat by successfully feeding off the millions of dollars of aid money that have poured into the country. But let's put such people to one side, however rich and self-important these people have become, they are not the future.

The true survivors are typically those men and women who have grown up and somehow done business in the country through war, civil war, invasion, regime change and so on. They have had to learn to keep their heads down on occasions, but also to grab opportunities when they come along. And they have consistently worked hard and learned to overcome all sorts of obstacles along the way. They typically make money in relatively simple ways by doing surprisingly simple things. They find niches that play on the natural assets and strengths of the country, rather than trying to force a new model into an unwelcoming terrain.

These are the business people who have managed to grow small businesses that turn over millions, employ tens or even hundreds of people, and (in some cases) provide livelihoods for thousands of others. They are the people contributing to the incremental change that is there to be seen by anyone who has watched the country over the past decade.

I have started this blog because I want to counter some of the negative perceptions of Afghanistan as an investment location that have grown up, and share my experiences of working with courageous people in very difficult circumstances. I have worked with successful (and not so successful) Afghan and international investors over the past years, and their stories point the way towards a more positive future than the league tables might suggest.