A challenging market exists in Afghanistan, and potentially in Iraq, for U.S. contractors, equipment manufacturers and dealers.
Afghanistan has virtually no infrastructure. Whatever roads and bridges it had were destroyed in the war against the Taliban and Al Qaeda.
As it tries to revive, with two million refugees returning to their land, the country needs major infrastructure projects as never before.
“Even if you built a road to nowhere, you would develop a middle class, educate people in new technology, put engineers and others to work and allow supporting activities to flourish,” said Christian Klein, Washington, D.C., counsel of the Associated Equipment Distributors (AED). “Obviously, tremendous opportunities exist in Afghanistan or other countries that have been oppressed.”
Said Deanna Goelzer, director of the International Division & Market Services of the Associated General Contractors of America (AGC) in Washington, D.C.: “Roads and airports are what they are looking for first and foremost, because you can’t construct a building if you can’t get to the building site. The infrastructure needs to be put back in place for anything else to happen. The problem is both war damage and lack of infrastructure in the first place.”
A news release from the Association of Equipment Manufacturers (AEM) in Milwaukee, WI, said: “Putting Afghanistan back on its feet will require significant investments in construction and agriculture, investments that could create export opportunities for equipment manufacturers.”
A preliminary needs assessment by the World Bank, the Asian Development Bank and the United Nations Development Program last year estimated that $1.7 billion was needed from international donors in the first year of reconstruction, with another $14.6 billion needed over 10 years.
Meeting the Need
Humanitarian relief efforts have been the initial priority in Afghanistan. After conferences in Bonn, Germany, and Tokyo, Japan, German and Japanese construction companies took the lead on some infrastructure projects to support these efforts. As U.S. companies slowly awaken to the possibilities, numerous countries around the world are beginning to make their presence felt.
• Siemens is reopening its office in Kabul, after it was closed for 23 years, to support renewed activities in the power field.
• Afghanistan, Pakistan and Turkmenistan signed an agreement on Feb. 7, to cooperate in building and operating a $3.2-billion 910-mi. (1,465 km) natural gas pipeline that would create 12,000 jobs and generate $300 million in annual transit fees. The Asian Development Bank will help fund the project, which was abandoned in 1998 after a Cruise missile, aimed at Osama Bin Laden, was fired into the country.
• The Aga Khan Fund for Economic Development has announced its interest in building a world-class hotel in Kabul.
• Representatives of a dozen British companies will go to Afghanistan shortly to explore business opportunities. Standard and Charter, a famous British bank, is among those sending experts to Kabul.
• An organization called HELP, based in Bonn, Germany, is building a water pipeline 30.4-mi. (49 km) long, with a difference in altitude of 3,937 ft. (1,200 m). The longest water pipeline in the country, it will help 25,000 people survive. After groundbreaking last December, as many as 500 workers began digging the trench. The pipeline will begin serving people in July.
• The China National Electric Equipment Corp. last year became the first Chinese company to open an office in Kabul. The company will play a major role in reconstructing an irrigation project in Parwan Province.
• Vehicles can now be driven from Kyrgyzstan and Russia to Khorog in Tajikistan across a new bridge which was largely funded by a philanthropic prince, who has given more than $30 million in aid to various projects in Tajikistan since 1994. After crossing the bridge, vehicles then proceed to Kabul through northeastern Afghanistan.
• A project is under way to repair the Salang Tunnel in the Afghan mountains. Built during the 1979-89 Soviet occupation, the tunnel is a key to north-south travel and aid coordination. Severe weather last winter turned the tunnel into a fume-filled death trap.
U.S. Efforts
The U.S. Department of Commerce established an Afghanistan Reconstruction Task Force last year. One of its main objectives has been to help American companies make business contacts in Afghanistan and export to it.
Among contractors, the Louis Berger Group has been among the first to take action. It has invited sealed bids for the design-build and completion of the 57.2 to 88.2 mi. (92 to 142 km) section of the Kabul to Kandahar Highway. The work includes rehabbing the road, drainage structures, and bridges, and installing road traffic signs and markings.
The group, which is under contract with the U.S. Agency for International Development (USAID), held a pre-bidders conference in Kabul Feb. 26 to 27. Bids are due on March 25.
The United States, Japan and Saudi Arabia, meanwhile, have pledged to pay two-thirds of the $250 million needed for road improvements in the country, and the U.S. Overseas Private Investment Corp. has established a $50-million line of credit to encourage U.S. business activity.
The U.S. Trade and Development Agency (USTDA) also has been actively promoting business in Afghanistan. It has funded orientation visits to the United States for Afghan officials in the power, aviation and telecommunications sectors and has provided approximately $200,000 to assist business development. It also is co-sponsoring, with the U.S. Dept. of Commerce, a conference in Chicago, IL, on June 8 to 10, which will discuss the rebuilding of major infrastructure in Afghanistan, including power and energy, water and sanitation, transport, buildings, gas and oil pipelines, construction, health care, and tourism. (For further information, call 866/636-4729.)
Very high level officials in the Department of Defense are reportedly studying a “Rebuild Iraq” effort.
Obstacles and
Opportunities
Ravaged by years of civil war, conflicts with other countries and the ongoing war against terrorism, Afghanistan is no easy market. One of the obstacles to rebuilding the war-torn nation has been the country’s relative instability.
Questions that some raise include:
• Is the country stable enough to undertake major rebuilding efforts?
• Can international lending institutions, or any countries, through their overseas aid programs, provide enough funds to pay for rebuilding?
Financing has always been a major problem in the rebuild effort. Factors supporting major funding from the United States, however, include a moral obligation because the United States has caused a good part of the damage, and long-term advantages to our own, and the world, economy.
“Absolutely it’s in our interest to build a supportive economy,” said one observer. “These are the people who can receive one of the benefits of freedom, which is opportunity and stability and an increase in the standard of living. As the economy rebuilds in Afghanistan, we will have a better partner. This has been the case with many of the countries over the years that were previously not necessarily democratic governments even though, in Kuwait, Germany and Japan got a lot of the business. There’s a potential market in Afghanistan for contractors, equipment manufacturers, and dealers.”
AED’s Klein agreed on the need for stability in Afghanistan:
“You need a transparent, established rule of law, obviously, to reassure a dealer, for instance, that he will be paid for an equipment rental,” he told Construction Equipment Guide (CEG).
Contractor Concerns
Contractors, too, have expressed concerns:
“U.S. contractors are trying to make sure that whoever claims they can partner with them on Afghanistan projects are actually true to their word,” said AGC’s Goelzer.
“Contractors in Turkey, for instance, are very interested in partnering with American or other firms on going into Afghanistan. Mainly this is because they obviously don’t want to assume all the risk and believe U.S. firms have contacts, which are necessary for doing the job and getting paid. It’s a ’You pat my back and I’ll pat yours’ type of deal. As with work in any country, you have to take all of that with a grain of salt and consult a reputable source to verify everything. That’s part of what we do.”
Could a U.S. contractor go into Afghanistan alone, without a partner?
“It depends on the contractor,” Goelzer replied. “Of course, I wouldn’t recommend it to someone who has never done international work before. Contractors need to possess experience and understand what’s going on, the type of risks, both physical and financial, which they’re undertaking. You need to work all that out in advance, making sure how you’re paid.”
Goelzer said, “Some reconstruction has started, but not much,” and added, “Especially because of the present situation here in the states, with potential war any day now, I don’t think anyone is gung-ho. I don’t know that any of our contractors are over there now, though some have indicated to me that they would be interested in pursuing work if the opportunities arose and the circumstances were correct.”
Asked if contractors see much of a market in Afghanistan, Goelzer replied:
“Our contractors are more interested in China and Mexico. We partner a lot with the Canadians. Maybe on the fringes we’re looking at trade opening up with Chile. If you’re going into a high-risk market — and there’s some risk in China — you have to know there’s a lot of money there. With Beijing holding the Olympics in 2008, there’s a lot of money to be had. With Afghanistan, you’re not looking at the same dollar figures. Contractors are in business to stay in business.”
Afghanistan’s provisional government has taken pains to create the needed business-friendly climate. It has, for instance, eliminated the requirement that a business make a $50,000 deposit before doing business in the country.
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