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FM AMEMBASSY KABUL
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RUEHIL/AMEMBASSY ISLAMABAD 2849
RUEKJCS/OSD WASHDC
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RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NSC WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 KABUL 000938 
 
SIPDIS 
 
DEPARTMENT FOR SA/FO, SA/A, EB 
TREASURY FOR PARAMESWARAN 
NSC FOR AHARRIMAN, KAMEND 
CJTF-76 FOR POLAD, CENTCOM FOR CG CFC-A 
COMMERCE FOR AADLER 
USTDA FOR DSTEIN, SGREENIP 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON ETRD EFIN PREL OPIC EAID PGOV AF
SUBJECT: AMERICAN BUSINESSES IN AFGHANISTAN: HERAT PROVINCE 
 
REF: 05 KABUL 3095 
 
¶1. (U) Summary:  Although Herat is Afghanistans second 
largest commercial center, it remains remote for Western 
businesses operating in Afghanistan.  The few foreign 
companies present are primarily small traders, including 
two U.S. firms offering groceries and frozen chicken and 
eggs.  This is the first in a series of reporting cables on 
U.S.-owned businesses operating in Afghanistan and on the 
business climate in Herat. End summary. 
 
¶2. (U) While the number of foreign firms registered to do 
business in Afghanistan grows every month, few companies 
have yet ventured outside of Kabul.  Herat is one of 
Afghanistans major economic centers (reftel.) However, it 
remains, in the words of a local business consultant too 
far a-field for Western companies. 
 
¶3. (U) Herat possesses a solid manufacturing base 
concentrated in the Herat Industrial Zone. Despite being 
half Kabuls size, the city is more commercially vibrant, 
due largely to its proximity to Iran and relatively stable 
power supply (provided by Iran and Turkmenistan.) Yet very 
few foreign-owned companies (primarily Iranian, Turkish and 
Central-Asian) have set-up operations. One small scale and 
and 
one medium scale U.S.-owned commercial enterprise are 
profiled below; they are illustrative of the type of U.S.- 
owned businesses braving Afghanistans Western frontier. 
 
---------------- 
Jacubs Grocery 
---------------- 
 
¶4. (U) Herats first Western-style grocery store opened in 
September 2005 and business is booming.  Located on a busy 
downtown street, the store is well-stocked with American, 
European and Iranian products in self-serve refrigerators 
and freezers.  Owner Jacub returned to Afghanistan from 
Freemont, California, where he lived for over a quarter 
century.  In his New York Yankees cap and warm-up suit, 
Jacub admitted that he has not yet been able to blend back 
into his native culture.  His first venture, an internet 
cafe, failed due to lack of clientele and a poor network 
connection.  The grocery, however, is prospering.  Almost 
all his customers are foreign staff of international 
organizations operating in Herat.  Jacub offers 24-hour 
ur 
service and claims he can procure almost anything upon 
request.  One of the customers in the shop who has lived in 
Herat for three years told Econoff that most of the goods 
on sale arent available anywhere else in the city. 
 
¶5. (SBU) Prices of American and European products, such as 
cereal, sauces, soft drinks, snack foods and toiletries, 
are extremely low.  A 14 ounce bottle of Gatorade that 
retails in the U.S. for USD 1.50 was selling for 20 Afs 
(approximately 40 cents.)  Jacub explained that the 
wholesale price is just 5 Afs (10 cents) at the bazaar 
outside of the large Bagram Air Force Base north of Kabul. 
Bagram has a healthy informal market just beyond the wire, 
and many of the products sold there appear to be from 
shipments destined for the PX that fell off trucks. 
 
¶6. (SBU) Jacub supplements his Bagram purchases with goods 
procured in Pakistan and Iran.  He makes bimonthly trips to 
Iran where he buys six suitcases worth of goods, primarily 
ly 
Iranian products purchased from wholesalers.  Afghan 
 
KABUL 00000938  002 OF 003 
 
 
customs inspectors, he said, never search his vehicle or 
inspect the packages.  If they did, he is certain that a 
tip of just one dollar would be enough for the inspectors 
to look the other way.  Goods purchased in Pakistan 
destined for his shop arrive via more formal channels. 
Jacub places a monthly order through a broker for a 
container delivered to the Torkum border crossing. It is 
then forwarded by truck to Herat. 
 
¶7. (SBU) Jacub acknowledges his business is built on extra- 
legal activities and claims to have plans to establish a 
more legitimate supply chain by ordering regular containers 
from Dubai.  He also plans to open a restaurant on the 
second floor of his grocery to be called HFC - Herat Fried 
Chicken which will also cater to expatriates. 
 
------ 
Summit 
------ 
 
¶8. (SBU) Summit is owned by a Long Island-based businessman 
and distributes frozen chicken and eggs.  Summit began its 
Afghan operations in 2002 when it shipped its first 
t 
container load of frozen chicken from Arkansas and South 
Carolina to Afghanistan via Iran to Herat. (Note: U.S. 
Department of Treasury regulations prohibit U.S. companies 
from engaging in transshipment through Iran.  End note.) 
Since late 2004, Summits sales have increased three-fold 
and the company has set up a permanent facility in Herat. 
In mid-2005, Summit obtained an Afghan business license, 
leased land at the Herat Industrial Park, and built a cold 
storage facility.  Two recently installed freezer units, 
the only cold storage in the industrial park, are now 
stacked floor to ceiling with frozen chicken. The warehouse 
boasts thousands of cartons of American eggs destined for 
distribution across the country.  Summit reportedly imports 
twenty 40-foot containers each month. 
 
¶9. (SBU) Company representatives stated that while about 
half of their product arrives via Pakistan, this route has 
proved disastrous on many occasions as perishable cargo 
go 
spoiled while the company haggled for its release from 
customs.  Summits representative admitted that while 
shipment of their product via Iran is hardly ideal, 
predictable problems (i.e. request for bribes) at the 
border at Islam Qala is, for now, preferable to the 
tyranny at the Pakistani border. 
 
¶10. (U) Summit has two small shops in Herat, but 
distributes the bulk of its products to retailers in Kabul, 
Jalalabad, Mazar-e-Sharif and Kandahar.  The company has 
also applied for a space in the Bagrami Industrial Park in 
Kabul (currently fully occupied but slated for possible 
expansion) and plans to build additional cold storage units 
both for use in the further expansion of their business and 
for lease to fresh fruit vendors. 
 
------- 
COMMENT 
------- 
 
¶11. (SBU) While there may be more impressive examples of 
foreign direct investment in Afghanistan, these two U.S. 
companies illustrate the nature of and challenges faced by 
foreign-owned businesses willing to venture into 
into 
Afghanistans Wild West, a challenging environment that 
 
KABUL 00000938  003 OF 003 
 
 
in the last few months has been further complicated by 
political and sectarian divisions (septel.) These 
entrepreneurs have learned to deal with, and even rely on, 
the Afghan bureaucracy.  Although currently dependent on 
shady practices, both businesses recognize the need to 
legitimatize their operations as they expand.  Though 
insignificant on a macroeconomic scale, the presence of any 
foreign-owned businesses in Herat is an encouraging sign. 
 
NEUMANN