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  November 14, 2010

Business in Afghanistan, Connections Matter Most

Jonathan Landay investigates alleged corruption at highest levels in Afghanistan
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Jonathan S. Landay is McClatchy Newspapers' national security and intelligence correspondent. He has written about foreign affairs and U.S. defense, intelligence and foreign policies for 15 years. In 2005, he was part of a team that won a National Headliners Award for How the Bush Administration Went to War in Iraq. He also won a 2005 Award of Distinction from the Medill School of Journalism for Iraqi exiles fed exaggerated tips to news media.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay, coming to you from the McClatchy offices in Washington. Jonathan Landay, award-winning journalist with McClatchy newspapers, has recently returned from Afghanistan with an investigative report on a cement factory and a mine in northern Afghanistan. It's also a picture of alleged corruption and perhaps an example of why reconstruction in Afghanistan is not going very fast. Here's an excerpt of what he wrote—and you can see the whole article down here below the player. "Shovel-wielding miners in rags and plastic shoes, some with the protruding ribs and work-ravaged pallor of labor camp prisoners, toil deep inside this remote northern mountain, harvesting coal for some of the country's most powerful businessmen. . . . [T]he Ghori Cement Factory and the nearby Karkar Coal Mine have become symbols of the corruption, nepotism and mismanagement that pervade President Hamid Karzai's government, hobble the US effort to rebuild Afghanistan, and fuel the Taliban-led insurgency. . . . Nearly five years later, Ghori is churning out less than 1/25 the cement that AIC [Afghan Investment Company] pledged to produce. Karkar is a devastated sprawl of dust-blown wreckage and neglect where workers fear that their next shift could be their last. 'All they gave us were oily promises,' said Gul, 35, who asked that his last name be withheld, after emerging from Karkar's fetid tunnel, his face, torn pants and bare, concave chest encrusted with coal dust. 'We are never sure if we will come out alive. It is our choice to go in, but it's up to Allah if we come out.'" Now joining us to talk about his experience and findings in Afghanistan is Jonathan Landay. Thanks for joining us.


JAY: So tell us first of all who owns this mine and the cement factory, and what's going on there.

LANDAY: Well, this was the reason why I decided to go and look at this cement factory, the Ghori Cement Factory, the only working cement factory in Afghanistan, making it a strategic industrial asset, potentially, in a country where there's massive reconstruction going on, massive construction projects, a lot of it driven by the American military. And the reason that I looked at it also was because of the owners, or at least the people who operate the mine. One of them, the company that operates the mine, is owned—or led by, I should say, Mahmood Karzai, who is one of the brothers of the president of Afghanistan, Hamid Karzai. And his top partner in what's known as the Afghan Investment Company is a man by the name of Abdul Hussein Fahim, and his brother is Karzai's first vice president. These men are partners with another man who used to be part of this company, a man by the name of Sherkhan Farnood, in the Kabul Bank. The Kabul Bank is the country's largest private financial institution. It was taken over in February by the Afghan central bank because of questionable business deals, including the purchase of high-priced properties in Dubai, in the Gulf. And that's why I decided to go and take a look at their ownership—or let me say their control of this mine and the cement factory that the coal from the mine is used to power.

JAY: So this used to be owned by the Ministry of Mines.

LANDAY: It still is.

JAY: And they lease it.

LANDAY: They leased it to the Afghan Investment Company.

JAY: And the reason is is private operators are going to bring in private capital, and the private forces are going to create all new productivity. And what happened?

LANDAY: This is one of the main initiatives that was taken under the US-backed privatization effort in Afghanistan that began in something like '05, '06. This was one of the main projects. This was supposed to—at least at the time, according to the announcement that was made at the time, supposed to be heralding a new era in private investment in Afghanistan. And the men who organized the Afghan investment company—Mr. Karzai, Mr. Fahim, and Mr. Farnood—were talking about somewhere on the order of $100 million capitalization of their company, that it could go as high as $500 million in capitalization. That never happened.

JAY: And so what did they actually put into this mine and cement factory? The way you describe it in your piece is not much.

LANDAY: Well, the fact is that, as I said, that this is the only working cement factory in all of Afghanistan.

JAY: As you point out in your article, a country that doesn't have a heck of a lot of trees for building, so cement's a critical issue.

LANDAY: It is the main component used in construction. And when you consider that they have an estimated need this year for almost 4,000,000 tons of cement, I mean, this is a potential strategic resource. The problem being is that when AIC actually capitalized—.

JAY: AIC being the company Afghan Investment Company.

LANDAY: Being the company that got the leases, 49-year leases, on both the cement plant and the mine, they only had $22.25 million in cash. And they also had a similar amount in loans from the bank that these three men were partners in, coming to $45 million. The fact is, however, that there was an American-funded feasibility study looking at how do you recondition this cement factory, because the cement factory is—it's Soviet era technology. It's 50 years old. It's not in very good shape. It needs to be modernized and it needs to be expanded. And this American government-funded study said that in order for them to do that, they needed at least $570 million—more than half a billion dollars. And the study said that whoever it was that got that lease should have at least half that amount ready to go and invest in the cement plant. Well, the Afghan investment company got the lease, even though it had only $22.25 million in cash.

JAY: And some good connections.

LANDAY: Very good connections.

JAY: So are there people in Afghanistan saying this contract should be broken? I mean, clearly they haven't lived up to their end of it. So are they talking now about that this should be voided and that the government should get the capital and directly do this? I think you point out in your article, with the flooding in Pakistan, so much cement was coming from Pakistan, there's even more urgent need for this cement factory to actually be producing.

LANDAY: Absolutely. Well, they only have one of the two existing units that have been working in operation. Now, there's a second unit in this factory that had been semi-completed that Afghan Investment Company completed the construction of, but that's not working. And then they were supposed to build a third state-of-the-art production unit. They haven't even begun construction of that. That was supposed to be completed last year. They were also supposed to build a 25 megawatt power plant to run the new units. They haven't even broken ground for that, either.

JAY: So it's pretty clear, when you talk to Afghans, that one of the big reasons people are either supporting the Taliban or are ambivalent about who to support is 'cause there's so much corruption on the side of the government, both in terms of the drug trade and examples of this kind of corruption—I should say alleged corruption. What does this mean for the whole US policy in Afghanistan?

LANDAY: Well, when you have this kind of thing going on, it's— it naturally undermines what the United States has been trying to do in Afghanistan. Among other things, one of the main pillars of the United States-led counterinsurgency strategy is reconstruction, is rebuilding the country, and in particular, you know, building things like police stations, military barracks. They need places to put all of the new Afghan security forces that they're training and churning out as part of their policy, but also new roads, new water systems, new hydroelectric facilities. I mean, this is a country that was devastated by more than three decades of war, and they need this basic infrastructure to have a chance to make it, to be able to—for the government to be able to say to its people, look what we are doing; and for the Americans to be able to say, we're supporting the Afghan people, you need to be on our side, not the side of the Taliban.

JAY: But the other pillar of US policy was bringing back into power all these—many of whom were actually war criminals—warlords who have now become big drug lords. Can there be any solution here as long as the US keeps their alliance with these warlords?

LANDAY: Well, there's nothing much the Americans can do, because the Americans brought, quote-unquote—the Americans, I should say, and its allies brought, quote-unquote, "democracy", a democratic system, to Afghanistan.

JAY: Quote-unquote.

LANDAY: They've had elections. They just had their second parliamentary elections. Unfortunately, most of the people who won—a lot of the people who won are these suspected drug smugglers and war criminals who have been a major problem in Afghanistan. Last year they had a presidential election. Both of these elections, by the way, [were] hugely flawed, hugely rigged, and that is another source of huge discontent among ordinary Afghans. So you now have this power elite that's entrenched. And this is not a very savory crew, for the most part. And it's this kind of political system that makes this kind of questionable deal possible in Afghanistan. And it all combines to undermine any chance for the United States counterinsurgency strategy to succeed.

JAY: And perhaps even more importantly, undermines any chance of the Afghan people having some real democracy.

LANDAY: That's right. And I have to say that in the province where these facilities are located, in Baghlan province, which is a hugely strategic province, a couple of years ago there was virtually no Taliban presence in the north. Last year I went to Baghlan province to begin reporting on this story, and also to begin—to look at the security situation. I was able to drive halfway up the province, and you could drive through the province to other parts of the north, many parts the north. This year, I had to stop in the southern part of the province, because the roads out of the southern part of the province are now very insecure because the Taliban have expanded all the way down to the southern part of Baghlan province. And these two roads, I should say - it's very important -, the two main roads in the province, are now the two main northern supply routes for the US-led military force in Afghanistan. So it's a fairly serious situation.

JAY: Thanks very much for joining us.

LANDAY: My pleasure.

JAY: And I urge you to read Jonathan's piece. It's called Afghan business model connections matter most ["Factory, coal mine show connections matter most in Afghan business"]. And thank you for joining us on The Real News Network.

End of Transcript

DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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