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Bloomberg Businessweek, December 18, 2014

Afghanistan’s New Millionaires

In the U.S., wartime contracting is often associated with such names as Blackwater (now known as Academi), DynCorp International, Triple Canopy, and others, but on the ground in Afghanistan, the Pentagon depended on a small army of locals

By Mujib Mashal

“Do you want to listen to Taliban cassette?” Matiullah Matie asks as he steers his white Toyota Corolla along a narrow road surrounded by cornfields and mud huts. He keeps the tapes in the car for long drives, Matie explains, just in case he picks up a hitchhiker who looks like a Talib. “They think I am such a pious mujahid man,” the round, bearded businessman laughs. “They don’t know I am screwing them all.”

We are driving to the Nawa district, just 30 minutes outside Lashkar Gah, the capital of Helmand province in the southwest corner of Afghanistan. Matie is going to show us how he first became a millionaire.

Earlier that morning, photographer Lorenzo Tugnoli and I found Matie sprawled on his office floor. He’d spent the night Facebooking—until he passed out. In the corner, on the armrest of a brown couch, a Dell laptop flashed an error message. Stacks of blue posters for the cell phone company Salaam lay against the wall. Matie had recently bought the local Salaam distribution license. It’s his latest project.

When we drive into the bazaar at Nawa, people recognize Matie immediately. Many wave at him. He’s done business here before—and he’s already brought Salaam to the district. That’s the reason one man with a neatly trimmed beard approaches the car and leans in to chat. Matie curses his luck under his breath.

Matie conducting business in his office
Matie conducting business in his office. (Photo: Lorenzo Tugnoli)

“I have bought 100 SIM cards but no one buys,” says the guy, a retailer representing Matie’s franchise. Matie tells him to be patient. It’s a new company, he explains, business will pick up.

“Will you come back for lunch, all of you be my guests?” the man asks.

“Sure,” Matie says. “Make some chicken for lunch once we drive back from Garmsir.”

Matie has no intention of going to Garmsir or lunch with the man. “The bastard’s son still has links to the Taliban,” he says as we drive on. “You really can’t trust anyone.”

In a few minutes we reach the compound of the 1st Battalion 9th Marines—“The Walking Dead,” as a yellow logo proclaims inside one of its rooms. The U.S. Marines packed up a year ago, and all that’s left is a series of shipping-container offices that once housed U.S. Agency for International Development contractors. The desks and furniture are locked inside; the windows are covered in dust and cobwebs. But when the Marines ruled Nawa—the district governor’s office was within their compound—the Americans started Matie on his road to prosperity. In the U.S., wartime contracting is often associated with such names as Blackwater (now known as Academi), DynCorp International, Triple Canopy, and others, but on the ground in Afghanistan, the Pentagon depended on a small army of locals. And as hundreds of billions of dollars in U.S. taxpayer money poured into the country, it created a new class of wealthy, entrepreneurial Afghans.

The October 2001 U.S.-led invasion and the subsequent allied military campaigns transformed the country. At the end of 2014, however, as the American troop presence draws down to 10,000 from a height of 98,000, it’s becoming clear that the U.S. dollar has reshaped Afghanistan even more than the military did. In private, U.S. officials admit they don’t know how much they’ve spent on the Afghan war. Independent analysts estimate its cost at about $1.6 trillion—factoring in inflation and long-term care for veterans. The money found its way not just into the hands of ruthless oligarchs, as in post-Soviet Russia, but also into those of teachers, translators, restaurant owners, and drivers who tapped into the gusher of cash to become millionaires and multimillionaires.

In the five years that Mullah Omar and his Taliban regime dominated Afghanistan, “foreign currency was rare. There probably wasn’t even $2 million in the market,” says Khan Mohammad Baz, the bespectacled head of the currency exchange union at Sarai Shahzada, Afghanistan’s central exchange market. “By 2003 there was probably $1 billion circulating.” These days, Baz says, about $20 million worth of business deals are made in a day. The central bank alone pumps about $60 million a week into the market to buy back the Afghan currency and keep it stable.

About 36 percent of Afghanistan’s 30 million people live below the poverty line. “If you ask people on the streets whether we have a billionaire, they will shrug and say no,” says a senior Afghan economic official, who asked to remain anonymous because he is privy to sensitive information. “But I can tell you with confidence we have many. If the top 10 wealthy men in Afghanistan—I would say 9 of them products of the past 10 years—came together, they could buy this government, the bank, this whole system.”

Afghanistan’s megarich are not shy about their wealth. Many are driven around in $150,000 armored vehicles, trailed by convoys of cars and pickup trucks full of security guards. Several live in Wazir Akbar Khan, Kabul’s diplomatic enclave, but others have illegally carved up Sherpur, an historic hill district in the capital. Some have second homes in Dubai, Istanbul, or various European cities. Just like Russia’s oligarchs, many members of this wealthy class owe their fortunes to politics. Some are warlords who helped the U.S. topple the Taliban; others are technocrats who returned from abroad to work in the new government. Both groups enriched themselves through the country’s system of patronage and influence—and by drawing on the immense sums of American cash flowing into it. Afghanistan runs on connections, and many of the biggest dealmakers operate with impunity. A clan can have one brother in the administration, another in parliament, and yet another running a huge company or state enterprise. The family of former President Hamid Karzai was the object of much criticism for that reason.

Trailing behind the politically influential is a much larger—and younger—class of nouveaux riches, which includes Matie. Spread around the country, they’ve made money by getting close to the American military and responding to its immediate needs. Many were translators who saw gaps in the Pentagon’s supply chain and took advantage of the situation by becoming contractors. Others were simply entrepreneurs who fed off the donor money being doled out to every sector of the post-Taliban society.

There’s still money to be made from the American military—though it’s a much smaller pie, and more local contractors fight over it. The U.S. and its NATO allies will continue to provide Afghanistan with more than $5 billion annually for its security forces and $5 billion to $8 billion for reconstruction. But the largesse will now flow through the central government, with its propensity for playing favorites. From now on, ministries in Kabul will be in charge of dispensing the contracting cash.

The new president, Ashraf Ghani, is promising to bring order to procurement and contracting, but transparency may be difficult to achieve. Among Ghani’s first appointments was Hazrat Omar Zakhilwal, a finance minister under Karzai who was entangled in the country’s biggest banking scandal, among other controversies. Zakhilwal, who denies any wrongdoing, now has oversight over the entire financial portfolio of the country.

In 2009, Matie, then in his late 20s, trundled up to the Marine compound on a donkey, after treading slowly through a heavily mined field. “Out of control mines,” he recalls. The son of a religious studies teacher, he had already tried many jobs, including joining the Taliban, twice. He had been working as a customer-care representative—making a lucrative $300 a month—with one of the new telecom companies when he realized he wanted to start his own company. He was sitting through a business development training seminar conducted by Malaysians when he thought to himself, “I want to be my own boss.” He quit and got a license to start a construction company. He wrote up a company profile and fact sheet—as the Malaysians had taught him—and, two weeks before Ramadan, put the papers in a saddle, mounted his donkey, and headed for the Marines in Nawa. “Hi, sir! Is there anybody to talk to me?” he’d shouted in his elementary English at a Marine manning a watchtower. They were happy to let him in.

The Marines were part of Obama’s surge to push back a Taliban onslaught that threatened to overwhelm the towns loyal to Karzai’s government. In Nawa the surge expanded the U.S. military presence from 100 troops to 1,100; a contingent of that size needed local logistical support. When the Marines arrived, they found the local bazaar deserted—except for a boy selling cans of Pepsi. “You couldn’t find a single contractor here, they were all too afraid,” recalls Abdul Manaf, the aging district governor, as he puts on his hearing aid. “Matiullah was the first to come.”

The Marines had cash and lots of it. Congress has appropriated about $3.7 billion over the past 10 years for the Commanders Emergency Response Program (CERP), a fund that officers in Afghanistan and Iraq could draw on for “urgent humanitarian relief and reconstruction requirements in their areas of responsibility.” In Helmand province—one of the areas fiercely contested with the Taliban—the U.S. military would spend $153 million on 2,164 CERP projects. USAID also poured money into the area through foreign contractors who implemented so-called stabilization projects—such as rebuilding bazaars and supplying technology to district offices. For example, according to the Washington Post, USAID spent $30 million on agriculture in Nawa over the course of nine months in 2010. All of this created opportunities for enterprising Afghans such as Matie.

His first project was the reconstruction of the district governor’s office. It needed new doors, windows, fresh plaster—and walls. When the Marine captain proposed the project to him, Matie calculated an estimate on the spot: $10,109. He asked for five days to get things going.

Only later did he realize what he’d agreed to do. The area between Lashkar Gah and Nawa was strictly Taliban country—and Matie had to transport gravel, shovels, and barrels from the provincial capital to the Marine compound. So when Matie recruited laborers, he didn’t tell them he was sending them to Nawa but rather to another, safer district nearby. “I went ahead on a motorcycle,” he recalls. “When they got here, I said, ‘Don’t you worry. I will give you more money than you want. As much as you want.’ ” The workers stayed for the entire 15 days of the project.

To deliver supplies, he rented a Mazda dump truck for $600. He didn’t have funds to hire a security escort, but this time he didn’t lie. “We are going to Nawa,” he said to the driver. “But I am riding alongside you, and whatever happens to you will happen to me first.”

He found two motorcycles, one for himself and one for his assistant. He dressed in Taliban style: white clothing, a large paaj turban on his head, his beard oiled, black shades over his eyes. In his pocket he had a small radio that captured Taliban military signals, which he played loudly. As the motorcycles escorted the truck on the bumpy road to the base, they passed several Taliban. “Salaam u alikum,” he’d shout—the traditional “peace be with you”—with authority, and the Taliban would respond the same way, addressing him as Mullah sa’eb, a term of reverence.

To keep up the masquerade, Matie says he’d curse at the driver. “Keep going, you son of a swine. You f-‍-‍-er, this is what you get for supplying infidels. Keep driving.” (“I had informed him I’d be cursing at him,” Matie explains. “I told him not to take it to heart.”)

By 2012, Matie’s company had more than $2 million in the bank. It had delivered fertilizer and seeds; it had helped repair clinics, schools, and government buildings; and it had graded more than 77 kilometers of local roads, smoothing them with gravel. He also helped deliver USAID cash to far-flung districts as part of a jobs program called Cash for Work. He started other businesses as well, importing Iranian biscuits and shampoo from Nimroz, a large border province and hub for smugglers, distributing the products across the country. He invested his earnings abroad, including putting $100,000 into a bakery in the United Arab Emirates. He had become rich—thanks to American spending.

Because the prosperity of Matie’s newly rich class often stems from loose American money, it can carry the odor of malfeasance and corruption. The office of the U.S. Special Inspector General for Afghanistan Reconstruction (SIGAR) is investigating several cases, following the money to see if American funds were misappropriated or even spent to support the insurgency. Double-dealing is almost instinctive here, part of a survive-at-all-cost mentality ingrained by decades of chaos and war. When the country emerged from Taliban rule at the end of 2001, “it’s like we were stuck in a dark well of isolation, then someone threw us a rope to pull us up,” says Naseem Akbar, a former economic official in the Afghan government. “But we somehow got all strangled up in that rope.”

Corruption is pervasive and visible: the flashy car belonging to a tax clerk whose monthly salary is $200; the fancy bungalow of a precinct police chief. Money purchases status, buys protection—from the law and perhaps even from God, judging by the number of mosques built with ill-gotten funds and the many hajj pilgrimages financed by dirty money. “Has corruption become what holds everything together in Afghanistan?” one Western official asks. “Maybe.”

Unlike some of the extremely rich—who put their profits into foreign bank accounts—the entrepreneurial class tends to keep much of its cash within the country’s borders. “There’s everything-to-myself corruption,” the same official explains, “and then there’s this Tammany Hall kind of corruption, a sort of Robin Hood style, where you are generous to the community.”

Contractor-turned-philanthropist Shadman in his Kabul office
Contractor-turned-philanthropist Shadman in his Kabul office. (Photo: Lorenzo Tugnoli)

Hikmatullah Shadman doesn’t look like Robin Hood, though the American investigators have grave suspicions about him. He works in what used to be the Kabul home of Ahmad Zahir, a legendary entertainer known as the Afghan Elvis. Shadman, 29, likes flowers. His pastel-colored compound in Wazir Akbar Khan looks like a dollhouse, with plastic flowers strung across the ceiling and framing paintings, mirrors, and photographs. “Flowers make me happy,” Shadman says as he sits down for an interview about his businesses and philanthropies—which are mainly in Kandahar, almost 300 miles to the south. He wears a black sports jacket over a black tunic embroidered in silver. On the table in front of us are platters of dried fruit and bottles of Gatorade, Starbucks frappuccino, and Ocean Spray cranberry juice. A cleanshaven elderly man—whom Shadman refers to as mama, or maternal uncle—is thumbing his prayer beads while lounging on a couch to the businessman’s right.

Shadman prefers not to talk too much about his philanthropic activity—though it has earned him a degree of influence with the public as well as the government. The Afghan media says he arranged to set up dormitories for university students in the eastern city of Jalalabad; that he was one of the first to send a convoy of aid after mudslides devastated the northern province of Badakhshan in May; that he supports more than 60 students on scholarships, including 13 he sent to schools in India. Most recently, Shadman launched a Mr. Facebook contest in Kandahar to identify and award citizens who use the social media site for public good. He has supplied food—through the government—to 180 families in a Taliban-controlled village in Kandahar province. “We show that Talib means mines and explosions; government means aid,” he says. While he still instinctively refers to the ousted Taliban leader reverently as Mullah sa’eb, Shadman is trying to create a different kind of Afghan identity and nationalism—out from the shadows of the white-robed jihadis. In October he announced he would build a mausoleum for Malala of Maiwand, perhaps the most famous woman warrior in modern Afghan history, whose campaign against British invaders in 1880 led to her being described as the country’s Joan of Arc.

Shadman also traces his riches back to U.S. military money. The son of a literature teacher in Kandahar, he sold almond sweets in the bazaar after school. When the U.S. ousted the Taliban, he went to work for a local mason rebuilding the airport. Soon, he became an interpreter for a U.S. Army Special Forces unit that, within six months, conducted more than 50 combat operations in the area. Accompanying the U.S. soldiers kept Shadman away from home for weeks at a time but allowed him to save much of his monthly salary. He bought a Land Rover for about $4,000 and leased it back to the Special Forces. “I was making two salaries after that. I made $800, and my vehicle made $800.”

In a couple of years, he’d purchased hundreds of vehicles, renting them to the U.S. military and foreign contractors who came to Afghanistan. He also started doing construction projects for Canadian units that were part of the International Security Assistance Force, as the U.S. and its allied troops were called. His Special Forces bosses helped him with connections that got him contracts to supply propane to NATO bases in the south. Shadman’s main line of business, however, became trucking. Working first as a middleman for a Hungarian firm that provided the exuberantly decorated “jingle trucks” for ferrying goods throughout the country, Shadman quickly built a fleet of his own vehicles. Profits escalated with the U.S. surge. According to court documents, he carried out 5,421 transport missions for the ISAF.

Shadman is accused of defrauding the U.S. government of $77 million. According to court documents, SIGAR alleges that Shadman managed to expand his trucking empire only because he “bribed and paid kickbacks” to managers of the Hungarian contractor, who then allegedly inflated prices for Shadman so he could charge the ISAF even more. In October 2012, at 4:30 a.m., the U.S. military raided his compound in Kandahar. He says they flashed a light in his eyes, blindfolded him, tied his hands, and flew him to the prison at the American military base at Bagram. He was held there for 74 days and accused of funding the enemy and supplying women to the Taliban and alcohol to U.S. soldiers. In a civil forfeiture lawsuit, SIGAR and the U.S. Department of Justice asked for Shadman’s accounts in an Afghan bank to be frozen. However, they were quickly unfrozen by Afghan authorities and some of the money has made its way to Dubai, where he has three homes.

Shadman says he is heartbroken by the way the Americans turned against him. “I grew up with them, with their soldiers.” He insists he’s not afraid of litigation, because the evidence against him is flimsy. “My only wish is to prove to the American public that … in my case your tax money has not been wasted.” Then he turns from being politic to blunt. “My money is clean. I don’t hide it. It’s there in the open, for America to see it, for London to see it. I have no fear.”

Shadman has been able, so far, to withstand the legal assault on his reputation. While he no longer has any contracts with the U.S. military, he imports German energy drinks, which are extremely popular among young Afghans. He is planning to build a pomegranate juice factory in Kandahar.

Matie’s trajectory, however, has shifted. He’s gone from rags to riches to starting all over. In 2012 he decided to use some of his largesse to travel to Mecca for the hajj—one of the five “pillars of Islam” that pious Muslims are enjoined to do. When he returned from the monthlong trip, his money was gone. He says his partner had cooked up a scheme with locals, taking advantage of his absence to complain that 1,450 people hadn’t received their USAID Cash for Work payments because Matie was out of the country. His partner, he says, told him the laborers had already been paid. As USAID and the Marines tangled with Matie over details, the partner packed up and fled to Kabul. Matie says he’s appealed to the government for help, but so far nothing has happened to remedy the situation. “He will fight me by bribing the government with my own money,” Matie complains. “I can’t do anything in this government.”

He says his fortunes fell so low that he didn’t even have gas money when he was stuck in the countryside, his fuel tank and his pockets empty. “I called Marine friends, and they sent me fuel for my car.”

With U.S. money now being dispensed by the political elite, contractors such as Matie who aren’t at the top of the food chain have to change gears completely. That’s why he acquired the telecom distribution contract with some cash he saved from a couple of small projects for the U.S. embassy. What he makes now doesn’t compare to his income at the height of the surge. He’s philosophical about his new financial situation: “You make little, but it’s more sustainable.”

He acknowledges the pain of losing so much money but says it’s easier on him than others who’ve also seen riches come and go. He never let money change his modest “nomadic” way of living, moving from town to town to do business and sell services. “When I had money, I lived like this also,” he says. “I have lived because of my honesty and my parents’ prayers.” He adds: “Those who stole money from me, I know what kind of wrath God will inflict on them.”

Category: Corruption - Views: 5386


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