The Life of a 102 year-old Afghan Entrepreneur: An Economic Perspective Abdul Majid Zabuli By Mir Hekmatullah Sadat Jan.-March 1999 Lemar-Aftaab The majority of us recognize the word "entrepreneur." Webster's Collegiate Dictionary defines "entrepreneur" as one who organizes, manages, and assumes the risks of a business or enterprise. This definition is quite good, but needs some elaboration. An entrepreneur undertakes a new and untried business possibilities producing a new commodity or producing "an old one in a new way," reorganizing an industry, opening up a new market, developing a new source of supply, or exploiting an invention (Schumpeter, 1950). The achievement of any entrepreneur lies in his or her ability to judge the most opportune time for introducing an available technology. When talking about entrepreneurs, we think of Andrew Carnegie, John Rockefeller, Henry Ford, Donald Trump, or Bill Gates. As part of Afghanistan's heritage, Afghans must not forget their own share of entrepreneurs such as Loe Sher Khan Nashir Ghilzai, Abdul Aziz Londoni, and Abdul Majid Zabuli. Although Afghanistan's economy has been essentially agrarian until the present time, these entrepreneurs were able to bring together the means of production and profit from the product. This article will describe Afghanistan's economic system from the 1920's to the 1970's. For this purpose, we will focus on the role of the most influential Afghan entrepreneur, Abdul Majid Zabuli. Adamec (1991) informs us he was born in 1896 in Herat where he also got his education. Later at Tashkent. In 1917, he headed his father's export-import company in Herat, trading with Iran and Russia. In 1922, he moved the firm's headquarters to Tashkent and from there to Moscow, to operate a textile mill under the Soviet "New Economic Policy" (242). Under these policies, Zabuli attained numerous loans and subsidies from the Soviet Union. Until World War II, he had the largest trade relations among Afghans with the USSR. While in Moscow, he met Shah Amanullah, who was winding down his European tour. According to Stewart (1973), Zabuli, the Afghan representative of the Hakimof Company, decided to replicate an event from the memoirs of Tsar Nicholas II for Shah Amanullah in Moscow: For eight days, he pre-empted the section of the Grand Hotel which led to the dinning room on the second floor [Shah Amanullah] walked over [flowers], just as Nicholas had done. Of this $14, 600 party, the New York Times wrote, "It may open a new vista to the Soviet Treasury Department in the treatment of private businessmen" (361). After Shah Amanullah's return, the Afghan government made efforts to expand trade, begin manufacture, and improve transportation. However, the heavy cost of such projects forced the government to generate revenue by excising taxes on feudal landlords and animal ranchers. These policies created unhappiness among landlords and ranchers who began supporting anti-government uprising by well-armed tribal militia. Fearing the loss of many lives, Shah Amanullah left Afghanistan as the rebellion grew stronger. From the time Shah Amanullah left until General Nadir Khan returned, there existed no substantial economic activities. Mohammad Nadir Khan learned from his predecessor and did not excise taxes on landlords or ranchers but instead generated government revenue through tariffs. During his tenure and for the most part of Zahir Shah's administration, the economic modernization initiated by Shah Amanullah led to effective industrial developments. This was a result of pursuing economic laissez-faire policies, that is, no government interference. Nadir Khan's Prime Minister, Mohammad Hashim Khan, developed a close friendship with Zabuli while he was the Afghan Minister in Moscow. Utilizing this friendship, Zabuli received a government loan and permission to create the first bank in Afghanistan. Until this time, the government had no central bank but only a public treasury that could not determine fiscal policy. In the first year of operations, the government was a partner in the bank. Later on, the government withdrew most of its holdings from the bank and created the first central bank (Da Afghanistan Bank). Zabuli established the Ashami Company, which developed into Afghan National Bank (Bank-i-Melli Afghan) by private interests. John Griffiths (1981) explains, In 1933, Zabuli, surely one of the most remarkable entrepreneurs of this century, founded the Bank Melli [sic] and through it a whole range of new industrial enterprises. His greatest stroke of genius lay in circumventing the Koranic prohibition against the charging of interest by inventing the "money ticket." By this means, the bank took a fixed "profit" on its money and thus caustically avoided the prohibition. Zabuli thus released the capital needed for development and the bank itself provided the funds for more than thirty enterprises from vehicle imports to hire purchase, electricity generation to cotton processing (141). The National Bank financed the construction of facilities for new industries. Some of the ventures included cotton processing plants in the north, a cotton textile mill at Pol-i-Khomri, a sugar factory at Baghlan, and a woolen textile mill at Kandahar. "The government left the [National Bank] in charge of the private sector of the Afghan economy" (Gregorian, 362).Thus, the government gave a monopolistic right in exporting karakul skins and carpets and the right to import petroleum products and sugar to Zabuli's National Bank. Any businessmen wanting to export or import goods needed the prior approval of the National Bank. With Nadir Khan's laissez-faire economic policy, businessmen successfully took the reins of commerce from British Indian merchants. Afghan businessmen envisioned becoming more self-reliant, independent, and promoting Afghanistan's economic growth. They had no intereste in commerce with Great Britain, albeit Hashim Khan had great relations with its government. Instead, the businessmen preferred nations such as Germany and Japan. This ideology stemmed from Amanullah Shah's(1920s) era when it was believed that Germany and Japan posed no threat to Afghanistan's borders. The German government displayed mutual military interests with Afghanistan, which neighbors the USSR in the north and British India in the south. This military strategy further increased Germany's economic stakes in Afghanistan. The National Bank capitalized on this German interest. During World War II, the Soviets foreign trade with Afghanistan plummeted from 24% to 0%. In contrast, Afghanistan's balance-of-trade with Germany increased to 65%. Consequently, the National Bank opened an overseas branch office in Berlin. Gregorian (1969) details the profound relationship between Zabuli and the German government: [Zabuli] and some Afghan envoys kept in close touch with the German government. According to Nazi documents, in a series of meetings with the German government from March to June, 1941, Zabuli offered to discuss "the possible territorial changes resulting for Afghanistan from the war." What the Afghans had in mind, wrote Weizsaecker, State Secretary of the German Foreign Office, were "the British possessions in the southeast and south, to Karachi, and the Indus as the new Afghan border" (387). Zabuli supported the Hitlerian plan to stir up uprising among Afghan tribes trapped in British India. Afghan merchants were also against the nominal Durand Line because this arrangement blocked their exit to international seas. It was these beliefs of Zabuli that drew him and others closer to patriotic and anti-colonial movements such as the Awakened Youth (Wikh-i-Zalmayan). According to Klass (1990), Zabuli was among the founding members of the Awakened Youth (138). However, he left the group after the government repressed opposition groups. Yet, Zabuli still maintained his friendship with many members of the movement. He even recruited some of the individuals to the National Bank and its joint-stock companies. In 1948, Zabuli became Minister of National Economy in Shah Mahmud Khan's Cabinet. According to Bradsher (1985), Zabuli, on behalf of the Afghan government, visited Washington D.C. seeking a $118 million loan and weapons for national security: "The Truman administration was not impressed [and] paid little attention to Afghanistan" (19). Ma'aroof (1987) further explains that the United States only agreed to provide $21million: "Seeing that Afghan expectations were not being met by the US, Zabuli recommend refusing the loan but 'his Afghan superiors overruled him'" (46). According to Klass (1990), during a conversation with Truman, Shah Mahmud noted: "The Afghan government tends to think of the loan as of political so in the light of Soviet interest and offers of assistance to Afghanistan" (41). Soon after the rejection of economic and military aid by the United States, channels for Soviet economic offenses were opened. In the 1950s, the USSR became Afghanistan's major purchaser and supplier. Besides economic exchanges, the two countries had cultural and military exchanges, all of which paved the way for the Soviet invasion of 1979. In 1951, Zabuli resigned from Shah Mahmud's Cabinet because of disagreements and pressure from the royal family. According to analysts, Zabuli was grooming himself for the Prime Minister position in the event it broke free from the royal family. As a form of lobbying, the National Bank also gave favorable loans to government officials and military officers for constructing new homes. Although Zabuli was very close to the royal family, a major hindrance in his quest was none other than Prince Mohammad Daoud Khan, Minister of War. This rivalry with Daoud Khan was a major factor for his resignation. Another reason was pressure applied by the Finance Ministry headed by Mohammad Nowroz Khan. The Finance Ministry wanted to nationalize the exclusive commerce rights once bestowed on the National Bank. The government also wanted to regain the monopoly rights of sugar, tobacco, and petroleum. The Finance Ministry, furthermore, wanted a differentiation between luxury and necessity import duties. The government made spending on essential goods a priority by raising the import duty on luxury goods, thus, making them less attractive. Another area of dissension with the Finance Ministry concerned the audit right of Zabuli's National Bank by the government. The initiatives begun in Shah Mahmud's Cabinet bore its fruits for the government in Daoud Khan's Cabinet. Finally, Abdul Malik Abdul-Rahimzai, Minister of Finance, was given authority to audit the National Bank. In 1953, when Daoud Khan became Prime Minister, the belts of Zabuli and the National Bank were tightened. Dupree (1981) believes General Daoud Khan's rise to power in 1953 brought an end to the pioneering free enterprise system developed by Londoni, Zabuli, and Khan Nashir. One of Zabuli's enterprises that came under scrutiny was the Kunduz Cotton Company (474). Between 1951 and 1953, Zabuli left the country for Switzerland and then for his final destination, New York; however, his enterprises still operated under the National Bank's supervision. Daoud Khan went after the National Bank because he felt the economic laissez-faire policies had started to promote monopoly and contributing to boom-and-bust economic cycles. Hence, his administration discarded the principle of state noninterference in economic affairs and laid the groundwork for a "planned economy." Daoud Khan's "planned economy" approach lasted even after his resignation in 1963. During the "New Constitution," Zabuli was invited to the 1964 Grand Assembly (Loya Jirga). Although Zabuli was abroad, he participated in the political environment of Afghanistan. Zabuli supported a free enterprise movement (Dupree, 1981). Kushkaki (1985) adds that his newspaper Caravan was financially supported by Zabuli. In fact, Zabuli wrote articles about economics in the Caravan. The brief decade of the "New Constitution" ended in 1973 when Daoud Khan executed a coup d'etat and declared Afghanistan a republic. In 1975, Daoud Khan nationalized all banks including the National Bank. The republic lasted only five years until Nur Mohammad Taraki took power. According to The Kabul Times, in a letter dated June 19, 1978 addressed to President Taraki, Zabuli presented all his property assets to the government. In 1988, a conference of businessmen and factory owners invited Zabuli to Kabul. Although he was unable to attend due to medical reasons, he sent a message of confidence and optimism. The same year in New York, Dr. Najibullah met with Zabuli as part of the national reconciliation campaign. Although Zabuli left Afghanistan in the 1950s, he kept in touch with the political atmosphere of Afghanistan until his death in the Fall of 1998. This sentiment resonated throughout his life and even through his last will in testament. According to a copy of his will attained from Mr. Nour Delawari, Zabuli wanted his entire estate placed in a trust fund. His assets are then to be transferred to the Kabul University, after a representative government capable of being accepted by everyone takes power. Unfortunately, Afghanistan has still a long way to go before it meets the conditions mentioned by Zabuli. One person, one group, or one tribe by itself will not be able to solve Afghanistan's dilemmas. Reconstruction depends on the human and physical capital of Afghans. The best situated Afghans for relief are people living abroad, excluding those struggling to place food on their own table (for example, Afghans living in refugee camps). Many Afghans are still waiting for foreign countries and the United Nations to aid Afghanistan politically and economically. This is great if aid is given without any strings attached, however, this process will take a very long time. So, in the meantime, Afghans must ask themselves: "What can we do for Afghans and our homeland?" There are a few measures Afghans can take on their own: Initiate an unbiased research regarding the current problems of Afghanistan. The establishment of a national perspective based on facts. The eradication of discrimination and schisms, as well as the creation of a general accepted belief and idea aimed at unifying Afghans. Instilling the previous two items to Afghan youths living abroad. Providing knowledge and financial support in Afghanistan and to Afghans living in refugee camps devastated by warfare. (For example, doctors, nurses, teachers, etc. can donate their expertise during a Summer vacation.) Although these steps are just a starting point, they are human duties for every Afghan. Afghans must not wait for a conference, some group, or some one else to take the lead on this matter. Instead, Afghans must become their own avant -guard. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Other Works by Mir Hekmatullah Sadat: Light at the End of the Tunnel (Oct.-Dec. 1998) One Nation Under God? (April-June 1998) The Lost Treasures (Oct.-Dec.1997) Related Links: An Afghan Intellect: Mahmoud Tarzi (July-Sept.1997) by Y. Atta & H. Haidari Copyright © 1999 Aftaabzad Publications. All Rights Reserved. May not be duplicated or distributed in any form without permission.