Expertenbeitrag von Andreas Schweitzer CEO Arjan Capital Ltd.
At Arjan Capital, we are no strangers to frontier and complex markets. These are the markets we have thrived in for the past ten years and built up a successful track record of financial- and corporate advisory, as well as cross-border trade with Central Asia.
Having amassed experience in our group as well in neighbouring countries, including Kazakhstan, Uzbekistan, Mongolia, Georgia and even Iran, we have been present in Kabul, Afghanistan since early 2019 advising European companies in negotiating to secure Afghan national procurement contracts. Given that parts of the country are still mostly warzones, when it comes to business potential and new markets Afghanistan is for many SMEs and corporates still a "nyet", citing safety issues for their team members as a concern.
Looking beyond the scars of war, Afghanistan has plenty to offer - namely an ever-more qualified workforce with a determined will for higher education. Located in a geographical sweet spot, Afghanistan was for centuries a trade, business and cultural hub.
Afghanistan has strong ambitions to improve its grounding in Central Asia and with the world. It has the support of a robust national banking setup. Without an internationally recognised country-rating only a few Afghan banks currently enjoy international correspondent relationships, which is a substantial business hindrance for finance, trade and imports. Afghanistan is still a bazaar-style and trade-based society founded on cash transactions and only a young participant in documentary credit. Some of our work at Arjan has involved solving complex documentary credit problems in a secure and compliant manner.
The Afghan telecommunications network with widespread 4G coverage and broadband available in the urban centres can effortlessly match international standards. Such connectivity is not to be sniffed at, especially in a warzone. With banking and telecommunications in place, and improving by the day, Afghanistan should be considered a destination for SMEs and Corporates willing to collect premium margins in an upcoming frontier market.
The country has the needs and offers excellent rewards in various industries as well as the national infrastructure. Afghanistan struggles to produce and import cement and has a volatile electricity supply. At Arjan Capital, to cite just one example, we are currently organising the financing and construction of local cement production, starting with the analysis of appropriate locations dotted around the country.
As a result, a mill and packaging line might better serve the local cement market and faster lowering capital expenditure and risk for the investors compared to a full-scaled cement factory. We compliment the fact that the Governor of the region confirmed local public- and private-sector financing - a critical pull factor in attracting international investors. There are similar opportunities in various industrial sectors to be explored. Construction material goes hand-in-hand with the need to improve the country's transportation network. While roads run through the country linking urban places as well as smaller settlements, the blemishes of war are still visible with security not always guaranteed.
Providing materials needed for these improvements offer attractive rewards for the end-user, the procurer and the producer. Andreas Schweitzer CEO Arjan Capital Ltd. BUSINESS OPPORTUNITIES AND TRADE WITH AFGHANISTAN Provided legal ramifications are in place (which to our knowledge is not yet the case), inventory financing of gemstones and other high-value minerals would give substantial cash flow to the state as well as private operators. Investors receive premium returns for asset-backed financing with the collateral safely stored in a third-party jurisdiction. Lapis Lazuli will always be associated with Afghanistan. It is inextricable; part of the furniture since the 7th century BC, no less.
Afghanistan's glory doesn't have to be historical. It has the ingredients required to re-establish itself today. Its geographical location is strength itself. The country is situated in the middle of its biggest trading partners: Sanction-plagued Iran, semi-trusted Pakistan, India and touching China at the tip of its North-eastern border. It is linked in the North to Turkmenistan, as well as the international and financially upcoming Uzbekistan and Tajikistan. Afghanistan has the potential to re-establish itself as an international trade and transport hub in Central Asia, reaching over 300 million consumers. Shipments are already successfully transiting the country.
One more potential boon is the southern Iranian port of Chabahar, close to the Pakistan border. Despite the connectivity it offers, it is struggling to function efficiently - despite US sanction waivers - creating problems in supply chains affecting India and Afghanistan. Once Chabahar is fully functioning, Afghanistan's role as an internationally recognised hub would only grow.
Afghanistan is not a 'from-scratch' project. Far from it. While efforts are ongoing to align the public banking sector to international standards, the geographic infrastructure is in place to tap the country's resources and needs. A well-entrenched and respected local partner will help global companies to navigate local imponderability.
Arjan Capital has operated with this model since 2009 in the area. Arjan Capital is a London-based corporate and trade finance company. We are authorised and regulated by the UK FCA, the British Financial Conduct Authority. For further information, please contact us on +44 207 323 64 26 or , www.arjancapital.com
PS: In the afternoon of April 21st the Joint Chamber of Commerce in Zürich (JCC) organizes an event about New Business Opportunities in Afghanistan and Cross-Border Trade, see: https:// www.jointchambers.ch/jcc-events/jcc-switzerland-afghanistan- business-meeting.html
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