AFGHAN CARPET CLUSTER INTERVENTION BY CLUSTER PULSE Case study dated : 17 April 2006 POWER POINT PRESENTATION WILL BE GIVEN Global Network : www.globalnetworkindia.com , an international trade consulting firm & Cluster Pulse : www.clusterpulse.org , a cluster development initiative NGO , was introduced to Afghanistan Competitiveness Project of USAID under OTF Group in July 2005. The story of 12 months of intervention goes like this………… SECTORS : The intervention was in 2 clusters - Carpets and Dried Fruit & Nuts. CARPET ISSUES : Technology , Bank facility , Transport & Market access. 1. Afghan carpets are unique in designs & colours. They are all handmade. 2. There was no cutting & finishing facility in Afghanistan. 3. The cutting & finishing was done in Peshawar in Pakistan. 4. All exports were routed through Pakistan. 5. No Afghan carpet manufacturer had a bank account in Afghanistan. 6. They used to sell their carpets to Pakistan traders , who in turn exported these carpets to USA , Europe & worldwide. 7. The price realization to Afghan carpet manufacturer was quite less . 8. Afghanistan is a land locked country , so all shipments had to be routed through Karachi port in Pakistan. Customs clearance in Pakistan was a major hurdle. Therefore Afghan carpet manufacturers preferred to sell to Pakistan traders. 9. New , contemporary & modern design inputs were missing. Whatever designs were given by Pakistan traders , were made by Afghan carpet manufacturers. INTERVENTIONS BY CLUSTER PULSE - JAGAT SHAH : 1. In July 2005 , possibility of linking NID ( National Institute Of Design ) to Afghan carpet sector was explored. It did not get off due to lack of interest on the part of Afghan carpet manufacturers. At that point of time the "PRESSURE POINT "was market access. They wanted solutions to market access. 2. In September 2005 , a sensitization seminar was organized in Kabul which was attended by major Afghan carpet manufacturers. The seminar was inaugurated by The Minister Of Commerce of Afghanistan. In this seminar , first the Global market size of carpets was proven & then a model of consortia methodology was presented. 3. One to one meetings were initiated on the next day of seminar & 3 consortias were initiated with a very filtered process of 22 point questionnaire to judge the mindset & compatibility of consortia members. Three consortias were established through painstaking brainstorming sessions & negotiations on composition of consortia , constitution of consortia , methodology of working , democracy of decision making process , rules of operations , order sharing format, investment structure , staffing a manager issues , listing of activities etc… a. Kabul Carpet Consortia of Afghanistan ( KCCA ) - 6 Members / 4000+ weavers b. Aqcha Carpet Consortia of Afghanistan ( ACCA ) - 6 Members / 12000+ weavers c. Northern Afghan Carpet Consortia ( NACC ) - 4 Members / 4000+ weavers A manager was appointed by all 3 consortia within their member. 4. In Oct. 2005 , another review meeting of the 3 consortia was organized & it was decided to participate in DOMOTEX Hannover Carpet exhibition in January 2006. Preparations for the same included : - Promotion of carpet portal : www.afghancarpetconsortia.com - Preparation of catalogs & visiting cards of delegates. - Production of carpets to be displayed in the exhibition. Though initially it was decided that only few display carpets will be kept on booth , so that delegates have time to learn & book orders rather than sell carpets. However , later it was decided to take several carpets. 5. As the momentum towards exhibition date took place , a few cutting & finishing units started coming up in Afghanistan. 6. For shipment of carpets , in order to avoid shipment through Pakistan , it was decided to approach ARIANA Airways of Afghanistan to airlift the carpets from Kabul to Hannover at reduced rates. The reduced rates were derived based on the assumption of sea freight from Kabul to Karachi to Hannover. This was agreed upon by the airline as their regular flight from Kabul - Frankfurt used to go empty in terms of cargo. This was a major breakthrough because the pressure brought about by the 3 consortia members as a " Collective bargaining " tool worked very well. This was the perhaps the first time that the consortia members understood the power of coming together. 7. Visa documentation , logistics of flights , accommodation , transport , booth set up etc. was undertaken with many many hurdles. However , each hurdle was handled in a very co operative way. The delegates were visiting outside Afghanistan for the first time , so visa was a major issue. However , the German embassy in Kabul was impressed with the methodology & process of consortia and gave the visa on explanation of the model. This was the second time that the consortia members understood the power of coming together. Next time , these delegates will not have much problem in procuring the visas. 8. In January 2006 , a 16 member carpet delegation from 3 consortia went to Hannover , Germany to take part in DOMOTEX Exhibition. The booth was set up . Due to too many carpets on display & too many delegates sticking around the booth , some logistics problems came up. However , it was managed . For the first time , Afghan carpet manufacturers came face to face with actual importers & buyers of carpets. They learnt the tricks of selling & presenting. One common brochure of all 3 consortia was printed. Introduction of buyers started through this common brochure , explaining them the methodology of consortia approach. Most buyers were impressed by the fact that they were trying to work as a consortia. 9. All 3 consortia sold most of their carpets in the booth worth US$ 200,000 at a very good price ! 10. Afghanistan A Form was not accepted by German customs to clear the sold carpets to buyers. This involved a huge task. The fact that Afghanistan was cut off from direct international trade for last 30 years , created this situation. Afghanistan did not have the quality of paper & format for A Form ( GSP ). This was set up once and for all in German customs & the first direct Afghan customs clearance in Europe was done !!! This was a big achievement because now onwards , no such problems will be faced by Afghan exporters. In fact , the German customs officials too admitted that had it not be a consortia , they may have been more strict. They too liked the concept of consortia & appreciated the methodology. 11. Upon return to Kabul , ACCA consortia received 2 x 20' container direct order from Germany. They explored the route of Kabul - Bandar Abbas port in Iran for shipment. Though it proved costly , but they were happy because on one hand they could avoid the Pakistan customs & on the other hand they got better price which more than offset the difference in transportation cost. It is assumed that the day INDIA ASSISTED road ( construction going on ) from Kabul to Bandar Abbas in Iran is ready , all Afghan exports will move from this road !!! 12. All 3 consortia have opened their bank accounts & are ready to deal with LC's & money transfer in US$ / Euro. 13. In April 2006 , a wrap up seminar was organized in Kabul to review next steps. Following next steps were finalized : - Set up cutting & finishing facility in Afghanistan - Design intervention is now a priority because the Afghan carpet manufacturers are now confident of export market . - Participation in DOMOTEX - Dubai in May 2006 - Participation in Atlanta Rugs Fair in USA in July 2006 : www.afghanrugs2usa.com The same process has been adopted for visit to USA - Atlanta fair : In July 2006 www.afghanrugs2usa.com Thereby proving that it is a sustainable development approach. 14. Local BDS providers have been introduced to the 3 consortia who are using them for market & technology interventions. 15. Several Afghan carpet companies have come forward to create 3 more consortia on similar lines. They say - " Every one follows success " !!! enjoy your life………………….. Jagat Shah Mentor - Cluster Pulse www.clusterpulse.org