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Developers Plan Luxury Hotel in Kabul

Afghan-U.S. project is a vote of confidence in a country still rife with violence and insecurity.

December 01, 2002|Chris Kraul | Times Staff Writer

KABUL, Afghanistan — A luxury hotel that an Afghan American investment group plans to build here with the financial backing of the U.S. government would be the largest private development project this war-torn country has seen in decades and a vote of confidence in a country still rife with violence and insecurity.

If the deal's loose ends are tied up as expected, a $40-million hotel that Afghan officials say will be managed by Hyatt Regency will be built on land opposite the U.S. Embassy. Financing is to come from the Overseas Private Investment Corp., a U.S. agency that specializes in making loans in countries where commercial banks fear to tread.

The 200-room project is significant for practical and symbolic reasons. It would fill an enormous void in hotel rooms in a city left largely in ruins by more than two decades of war. The shortage makes it difficult for foreign businesspeople to work here, impeding the country's economic recovery.

Moreover, the project is taking shape amid sporadic but ongoing rocket attacks and bombings in and around the capital and demonstrates faith among the investors that better days lie ahead.

The Afghan government is leasing the hotel site to the developers on favorable terms, sources say, motivated by the jobs the project will generate and by the prestige of having attracted an international hotel chain, the first here in the capital in 30 years.

Construction on the property, once destined for the Czech and Polish embassies, is to start early next year, pending final approval of the OPIC loan, which is expected to cover at least 60% of the construction cost.

Afghan and U.S. officials said they were confident the loan would come through.

The hotel is being built by a partnership that includes a group of Afghan American businesspeople who emigrated to the United States, made their fortunes and have returned, the investors say, to help get their homeland back on its feet. Also drawing them, they admit, is the possibility of enormous profits in a country deficient in many basic goods and services.

"It is our duty to be back here and share in the rebuilding of our country after 22 years of warfare and misery," said Zaher Yaqubie, 41, whose family established a successful New York City-based trading company after arriving in the U.S. in the 1980s. His business here, Afghanistan Reconstruction Co., has as its partner in the hotel project one of Turkey's largest construction companies, Yuksel.

The Afghan and U.S. governments played key roles in striking a tentative deal at a recent meeting in Dubai, United Arab Emirates, that included officials of Chicago-based Hyatt, said Adib Farhadi, director of the Afghan Foreign Ministry's economic affairs department.

Christina Koenig of Hyatt International said last week that her company "had been invited to participate in discussions" about operating a hotel in Kabul but as yet had signed nothing definitive.

Hyatt operates several hotels in Central Asia and "knows the area," she said.

Whether Afghanistan slips back into the "dark ages of chaos" that it experienced in recent decades depends on the country's ability to attract private investment such as the hotel project, Farhadi said.

"A lot of companies, foreign and Afghan, are on the sidelines waiting to see what will happen," he said. "When a company like Hyatt is ready to come, it symbolizes that stability is on the way. This is a great symbolic sign of reconstruction."

World Bank chief economist Nicholas Stern agrees that private investment is crucial to Afghanistan's future. Stern visited Kabul last week and met with government and business leaders to discuss economic growth and how to stimulate it, saying this was an "absolutely critical period in Afghanistan's history."

"It will be the private sector that drives growth," Stern said, adding that there are obstacles to be overcome. "Security would be one, so would red tape and the absence of a banking system and the lack of infrastructure, particularly transport."

Stern, who toured World Bank-sponsored rural development projects here, sees small but sure signs that "beneath the radar screen," progress is being made on a community level as "people become confident war won't break out again."

In addition to the loan, OPIC is providing the hotel developers with political-risk insurance to cover any losses caused by terrorism or war, said sources close to the deal.

Those risks were apparent last week when a rocket launched by terrorists landed in downtown Kabul just yards from the Finance Ministry the day after six rockets were fired in the eastern environs of the capital. The week before, an Iraqi Kurd was arrested for allegedly possessing explosives and planning to assassinate President Hamid Karzai or Defense Minister Mohammed Qassim Fahim.

Yaqubie said he recognizes the risks but is willing to take them. "We must put our hands together and make it happen," he said. "If not, the only alternative is chaos."

Some long-awaited public works projects also are underway, generating jobs and lending legitimacy to the Karzai government. Construction began Nov. 10 on a $180-million road rehabilitation project linking Kabul to the nation's western border. The 600-mile project is being funded jointly by the Saudis, the Asian Development Bank and the U.S. government.

Work also has started on a new U.S. Embassy building adjacent to its existing site, a project that will cost $115 million. Yaqubie's company is a subcontractor on a 25-mile section of the road project and on the embassy construction as well.

Other private projects are coming along, albeit slowly. The renovation of a Kabul landmark, the Hotel Kabul, was announced last month. The Aga Khan Development Foundation will spend $27 million to renovate the 80-room hotel, which was damaged during the war. The hotel will become part of the luxury Serena hotel chain owned by the Aga Khan, a Muslim leader and philanthropist.

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