Business English

Commerce amid the car bombs

von Jon Boone

After 30 years of war Afghanistan has been left with a dreadful skills base, almost no infrastructure and a private sector whose most notable business success has been cornering the global market for heroin. Most people might think twice before setting up a new business in Afghanistan.

Being shaken awake by the noise of a massive suicide car bomb tearing through one of Kabul's smarter neighbourhoods would make most people think twice about setting up in business in Afghanistan.

But David Elliot's faith in the country's potential for start-ups is not dented by such reminders of its deteriorating security situation. A 49-year-old English entrepreneur who has spent his career founding businesses in the US and Europe, he decries multi-nationals that use the "security excuse" to give Afghanistan a wide berth.

"Walk down to the market and you will see masses of business going on and they've just had a car bomb 3km away," he says, speaking just hours after the bombing late last year of a US convoy in the middle of the diplomatic zone, which killed two. "It hasn't stopped anyone doing their shopping."

Local people exchanging small amounts of money

It is the business activity in the bazaar that most interests him - small amounts of money passing between ordinary Afghans, some of the poorest people in the world.

Mr Elliot's activities are motivated in large part by the ideas of Stuart Hart and CK Prahalad, business school academics who argue there is a fortune to be made from those at the "bottom of the pyramid" (BOP) - the 4bn people living on less than $2 a day. The canniest entrepreneurs, says Mr Elliot, will find ways to develop products and services for the world's poorest. By helping the poor to help themselves, the BOP approach is unlike traditional development strategies, which tend to focus on handouts and direct public investments.

: Car bombs are still a huge problem

Armed with cash from the United States Agency for International Development, USAid, Mr Elliot is teaming up with local entrepreneurs to tap into the Afghan part of the BOP market, which he estimates is worth $29bn. He is using the cash to back an eclectic mix of start-ups, including a chain of pharmacies, credit bureaux, a payphone business run by and for women, and even a boutique hotel near Band-e Amir, a series of five lapis-blue lakes in the mountains of central Afghanistan.

It is a far cry from his former life. In the course of his career, he set up medical businesses in the US and a company offering medical emergency assistance for travellers, called US Assist, which he sold to insurer Axa in 1993 for $22m.

But he gave up trying to make his fortune six years ago after the crash in technology stocks led to a vertiginous collapse in his personal wealth. As one of the founders of a search engine called Direct Hit, he should have cleaned up when the company was acquired for $560m. But, he says ruefully, "there was a 90-day lock-up on the shares, so I just had to watch as $30m went down the tubes.

"At the same time the whole World Trade Center tragedy threw into stark relief this division of haves and have-nots, so I figured it would be more useful and more interesting to spend the rest of my career trying to engage business in private-sector solutions to poverty," he says.

Almost no infrastructure

His decision to go into development brought him back to Afghanistan, a country he first visited as part of a "magical" trip in a battered VW van from Turkey to India in 1976, and about which his brother Jason wrote a book, An Unexpected Light .

After 30 years of war Afghanistan has been left with a dreadful skills base, almost no infrastructure and a private sector whose most notable business success has been cornering the global market for heroin. Perfect, in other words, for a buccaneering entrepreneur who sees a new opportunity at almost every turn.

"It is an incredibly dynamic market because everything needs to be re-done and you are just seeing the birth of businesses that in any western country are already developed and established," he says.

"Try starting a credit bureau in the US [he is backing such a business in Afghanistan] and you would not have an easy time of it because all the major players are already there. But in Afghanistan, there is nothing and [its lack] is hampering every single aspect of the whole private-sector economy." Moreover, he says, the business environment is a joy compared to the "utterly byzantine bureaucratic processes" of France, where he set up a software business involving smart cards, and where he is based with his family, although for less than six months a year.

: There is still a large international military presence in the country

While some of his projects aim to build important but unremarkable businesses, many of his initiatives do not, and probably never would, exist in developed countries.

For example, he is trying to work out how to make wind-up LED lights commercially viable in a country that, lacking electricity, is wedded to kerosene lanterns that give out poor light and "cause terrible accidents when they get filled with jet fuel that was supposed to go to Bagram [air base]". But while LED lanterns are cheaper than kerosene in the long run, Afghans will not buy an $18 lamp when they can get a $1.50 kerosene burner.

"It's a complicated development challenge, and we will need to bring in a micro-finance partner, a consumer credit partner and an international donor to guarantee a bulk order of 2m lanterns to get them at a price point where we could develop a whole market for them in Afghanistan," says Mr Elliot.

Some of his plans combine development with a dash of dotcom quirkiness, such as an international remittances business that would allow expatriate Afghans to send not just cash to their families at home, but also flour, cooking oil or even goats. The idea is that they will select a gift from a website and when it is delivered they will be e-mailed a digital photo of their beaming relative receiving it.

New businesses to transform lives

Whatever the business, it is intended to transform lives, like his attempt to set up a chain of high-quality, branded pharmacies. "Doctors either over-prescribe drugs that aren't needed or they sell out-of-date or adulterated drugs from Pakistan. Consequently getting sick is one of the biggest reasons Afghans get into debt. So you've got poor quality, high costs - basically a lousy service.

"It's a classic opportunity for an entrepreneur and potentially we will succeed in doing here in the private sector what the Ministry of Public Health can't do, which is getting out a lot of corruption and inefficiency in a market worth several hundred million dollars."

Mr Elliot says: "I came out here rather naively with high hopes and expectations for the development community. But because most of the people in the diplomatic and development corps don't understand how the private sector works they think of it is as a nasty, grubby, money-chasing thing."

Businesses, he says, should join forces with the huge military and diplomatic efforts in the country. But as long as car bombs continue to rock the capital, that day seems a very long way off.

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