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RC West's Untold Economic Success Story

Chest-e-Sharif Quarry in herat province, Afghanistan.

RC West's Untold Economic Success Story
by Melissa Skorka
Regional Command West

HERAT, Afghanistan -
If there is an instructive success story in the war zone, it may lie in the extraction of the nation’s massive reservoir of natural resources. The discovery and gradual exploitation of the country’s mineral riches, which could exceed $3 trillion, have brought hope of a stronger economy capable of deflecting the insurgency and ensuring a more self-sufficient region.

Ultimately, an economy is built out through trade, not aid, as growth and new jobs are the most sustainable way to raise living standards. With increasing exports across Europe and Asia, the Afghan marble sector already earns at least $15 million per year and remains the top marble producer in the region.  If present maturation trends hold, it could generate nearly $700 million in annual exports by 2020. Building upon this initial success could therefore have far-ranging effects on national economic output and political sustainability in the post-ISAF environment.

Already there is clear room for expansion. Mining experts estimate that billions of metric tons of first-class white marble is harbored in the western Afghanistan province of Herat. In less than half a decade, the global price of such luxury white marble has soared, and the natural resources have been leveraged by Afghan business leaders to turn what was previously a regional comparative advantage into a global competitive advantage.

The region’s prospects, however, depend heavily on the industry’s ability to innovate and upgrade. At present, lingering technical development problems continue to reduce export revenue by as much as 50 to 75 percent, particularly as new businesses master the intricate survey and production process for sites that have been lightly developed.

The largest marble producer in Afghanistan, Equality Capital Management (ECM), founded in 2006 by Nasim and Adam Doost, has provided a successful framework for addressing the industry’s inefficiencies in Herat province by attracting foreign investment and installing advanced technology. By following ECM’s lead, small and medium enterprises (SMEs) run by Afghans are already contributing to the industry’s modernization.

In Herat, ECM’s processing plant has improved extraction and production. ECM procured state-of-the-art machinery, raising the quality of cut marble blocks to international standards, while using public-private partnerships to improve infrastructure, electricity, and access to deepwater ports, ultimately resulting in unprecedented lucrative export opportunities.

Indeed, since ECM’s arrival, there has been a new scramble for prized Afghan stone. Foreign investors from a vast lineup of nations including Italy, India, China, Russia, Indonesia, and Canada actively seek Herat’s natural resources. Now considered a global luxury good, the Afghan white marble is increasingly used in projects across the globe, including recently in the building of China’s St. Regis Shenzhen, a premier five star international hotel and the eighth tallest building in the world.

ECM has become an engine for the Afghan mining industry, and with ISAF Regional Command West support has transformed natural resource development in the war zone by addressing security and stability. Because not all foreign companies are keen to enter an unproven market in a conflict zone, one of the most critical steps has been ISAF’s and Afghans’ leadership in cultivating joint ventures to share risks and costs. More importantly, the combination of security operations and economic growth sprouting from these marble-for-security deals between GIRoA and Afghan SMEs has created challenges for the insurgency. As a result of such deals, the Ministry of Interior and the ANSF 207th Corps have become more responsive on security in order to reinstate the flow of marble, constraining insurgents’ activities in key zones.

Equally important, ECM has created an impressive spillover effect, as the number of marble SMEs has increased from four to over forty, while quarries contracted with the government in Chest-e-Sharif grew from two to twelve, together employing over 5,000 people. Responding to this outgrowth, many of the SMEs established the Herat Marble Union to work together to help capitalize on opportunities and solve critical challenges facing the industry. The Herat industry now serves as a model for Afghan SMEs in other regions, as  ECM and the Herat Marble Union recently hosted Afghan business leaders to tour their factories and learn from  the success in Herat, where Afghans themselves are playing the lead role in the economic growth and stabilization of the region.

Fundamental obstacles to economic development remain.  To be sure, no “one-size-fits-all” solution can guide marble SMEs and the young entrepreneurs that lead them, but drawing on certain measures based on ECM and ISAF Regional Command West’s blueprint for facilitating foreign direct investment and modern technology can help set practical steps Afghans may take towards further achieving transformative results. As the leader of the Herat Marble Union, Engineer Wahid, makes clear, local SMEs are still in great need for stronger partnership with foreign investors, particularly as the marble sector is capital intensive and driven by technological skills, which are still not readily available to the Afghans.

Perhaps even more important, the experience gained in building out Herat’s extractive industry can provide a model for diverse and emerging industries in strategic regions. Ultimately, these successes could help set in motion a broad expansion of the Afghan national economy in the decades to come.