VZCZCXRO8032
RR RUEHDBU RUEHIK RUEHYG
DE RUEHVL #0760/01 2231230
ZNR UUUUU ZZH
R 111230Z AUG 06
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC 0478
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/SECDEF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEKJCS/JOINT STAFF WASHINGTON DC
RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC

UNCLAS SECTION 01 OF 02 VILNIUS 000760 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV PREL ETRD LH AF
SUBJECT: INVESTMENT PROSPECTING IN MAZAR-E-SHARIF, AFGHANISTAN: ONE 
FIRM'S EXPERIENCE 
 
REF: VILNIUS 739 
 
VILNIUS 00000760  001.2 OF 002 
 
 
¶1. SUMMARY:  An executive from one of Lithuania's largest companies 
visited Afghanistan in July to scout for business and investment 
opportunities.  Part of a larger GOL delegation, he split from the 
group for a few days to visit a fertilizer factory in Mazar-e-Sharif 
that his company had assisted in the 1980s.  The executive told us 
of the obstacles he sees to investing in Afghanistan, including poor 
infrastructure and uncertainty about the government's plans for the 
future, but also identified some commercial opportunities in 
manufacturing plastic bags and selling sweets.  The executive's 
company is now considering whether and how to invest in Afghanistan. 
 END SUMMARY. 
 
------------------------- 
A VISIT TO MAZAR-E-SHARIF 
------------------------- 
 
¶2. Rimantas Sinkevicius, Director of Development at the Achema 
Group, visited Mazar-e-Sharif July 13-15 to inspect the 
descriptively named "Fertilizer and Electricity Producing Factories 
in Mazar-e-Sharif."  (NOTE: The Achema Group, Lithuania's second 
largest industrial concern, manages a group of 40 companies involved 
in everything from producing fertilizers and other chemicals to 
managing hotels and running a television station.)  Sinkevicius was 
part of a larger delegation of Lithuanians (reftel) that visited 
Afghanistan, but he was the only member of the delegation to travel 
to Mazar-e-Sharif.  He related his experience in Afghanistan to us 
on August 9. 
 
-------------------- 
A FACTORY TOUR . . . 
-------------------- 
 
¶3. Some 20 years ago, Achema sent some of its staff to help run this 
1960s-era factory.  Achema decided it wanted to examine the current 
state of the facilities, with an eye towards investing in it, or 
even purchasing it outright.  Sinkevicius said that the plant has 
the capacity to produce 150 tons of urea per year, but currently 
produces only 40 tons, and that only one of the four 12 MW turbines 
is functioning.  He added that the factory's payroll of 2600 
employees is three times the size it needs to be, and that the 
inconsistent availability and quality of natural gas (a critical raw 
material in urea fertilizer production) from neighboring Jawzjan 
province was a serious problem for the factory. 
 
------------- 
. . . SORT OF 
------------- 
 
¶4. Sinkevicius said that he was unable to actually enter the factory 
and inspect its facilities because the factory's director (Abdul 
Walek) -- who had been on the job for only a week -- refused to 
allow him in without official, written permission from either the 
federal government or the local governor.  Unfortunately, said 
Sinkevicius, the local governor happened to be in Kabul while 
Sinkevicius was in Mazar-e-Sharif, effectively preventing him from 
obtaining the required permission.  Sinkevicius said that he had not 
expected this particular obstacle, and that he had not coordinated 
his visit to the factory with government or plant officials 
beforehand.  He said he was not even sure how he could have made 
these arrangements.  He also said that he was previously unaware of 
the services of the Afghan Investment Support Agency (AISA) and that 
Achema would contact them in the future. 
 
--------------------------------------------- --- 
SOME OBSTACLES TO INVESTING IN AFGHANISTAN . . . 
--------------------------------------------- --- 
 
¶5. Sinkevicius offered his observations on the obstacles that Achema 
would face if it tried to invest in Afghanistan, many of which would 
likely hinder other potential investors, as well: 
 
-- The unreliable supply of natural gas to the factory in 
Mazar-e-Sharif; 
 
-- A lack of adequate guarantees and protections for investments, 
backed by international institutions like the World Bank; 
 
-- A lack of understanding about the government's plans for 
Afghanistan's commercial future (he noted, for instance, that there 
are no taxes now, but wonders what will happen in the future when 
international donors stop financing the country); 
 
-- Poor infrastructure, especially dilapidated roads and no rail 
system; 
 
VILNIUS 00000760  002.2 OF 002 
 
 
 
-- A pervasive sense of uncertainty about whether or not the central 
government is actually in control and can enforce its decisions; 
and 
 
-- Government infighting that seems to focus on the distribution of 
the country's assets instead of a political process designed to 
enforce the rule of law. 
 
---------------------------------- 
. . . BUT SOME OPPORTUNITIES, ALSO 
---------------------------------- 
 
¶6. Recognizing these obstacles, Sinkevicius nonetheless emphasized 
that he saw commercial opportunities for his company in Afghanistan. 
 In particular, he said that there seemed to be a market for 
polypropylene bags, and that investing in a small facility that 
could produce these bags for industrial or personal use might make 
commercial sense.  He also said that he saw markets for sweets and 
textbooks, both products that Achema produces.  He said that he 
would present proposals in support of these ideas in September to 
his company's decision-makers, and offered to inform us of their 
decisions.  Sinkevicius also said that Achema might still be 
interested in the fertilizer factory if the Aghan authorities would 
also allow it to buy the natural gas well and production facility in 
Jawzjan province.  Without being able to control the supply of 
natural gas, he said, investing in the fertilizer factory was simply 
too risky. 
 
------- 
COMMENT 
------- 
 
¶7. Sinkevicius's trip, which the GOL strongly encouraged, 
facilitated, and supported, serves as another demonstration of the 
GOL's desire to see the international mission in Afghanistan 
succeed.  Afghanistan is probably not on the brink of a major inflow 
of capital from Lithuania, but a significant Lithuanian commercial 
success in Afghanistan would likely pique the interest of other 
businesses here.  We will stay in touch with Achema and continue to 
report on its plans for Afghanistan. 
 
CLOUD