Case Holder:
Ariana Balkh Textile Company

Contact details

Name: Tareq Sakhi

Aryana.Balkh@gmail.com; info@arianabalkh.com

Website: www.arianabalkh.com

Facebook: Ariana Balkh Textile Manufacturing Co.Ltd.

Improving the functioning of the cotton sector in Balkh

Promote decent employment opportunities, increase productivity and support private sector growth and investments in support services and markets.

Promotion of Youth Employment in Fragile Settings

Background & Context

Constant conflict in Afghanistan has rendered the security situation precarious and with an obvious negative impact on the economic and investment climate. Despite reforms to the legal and regulatory framework, there are still serious shortcomings in terms of developing the private sector, which is not yet sufficiently competitive. Years of warfare have meant that successive regimes have struggles to govern centrally and are often impotent, largely due to the lack of a tax base or a legitimate indigenous source of revenue.

One of the greatest challenges is to create jobs and/or business opportunities for the nearly 400,000 people entering the labour market each year.  Approximately half of the Afghan population is underemployed or unemployed, and the lack of work particularly affects women. The participation of women in the labour force is low – only 29 percent of women are economically active (consequently women headed households are the poorest in the world) and around 66 percent of this female labour force is engaged in agriculture and 24 percent in manufacturing.

Cotton production and related industries in Afghanistan

Historically this industry is one of the major sectors of the Afghan economy. Prior to the onset of war, cotton production, processing and associated  sales and marketing were major economic and industrial activities contributing to employment creation and the livelihoods of thousands of rural and urban households. The industry collapsed more than thirty years ago and there are now concerted efforts from both government and development partners to improve the functioning of the sector, promote decent employment opportunities and increase productivity.

 

***

The Problem

The Ariana Balkh Textile Company is a small textile company recently set up in Mazar -I – Sharif. It has the capacity to process from 800-1,600 kg of yarn and 2,500-7,500 metres of fabric per day.

The company depended on Pakistani semi-skilled and skilled labour, as Afghan workers were not seen as having the sufficient skills. This cost the company a lot of downtime because every two months the plant had to shut down in order to allow the Pakistani workers to go back home and wait for the renewal of their work permits. This was also costly as the company paid transportation and permit costs.

The company depended on Pakistani semi-skilled and skilled labour, as Afghan workers were not seen as having the sufficient skills. This cost the company a lot of downtime because every two months the plant had to shut down in order to allow the Pakistani workers to go back home and wait for the renewal of their work permits. This was also costly as the company paid transportation and permit costs.

“We could not hire Afghan workers because when we started we tried it and lost a lot of business because the quality of products we produced was not good because they were not skilled. This is why we resorted to hiring workers from Pakistan”

Mr. Tareq Sakhi, President of Ariana Balkh

Objective

Given that the company was employing Pakistani workers and subsequently having to shoulder heavy costs, the objective was to hire local workers and train them to build their capacity. This would have two benefits – lower labour costs for the company and create jobs locally.

To achieve this, the company agreed to partner with ILO’s Road to Jobs (R2J) project to create jobs for 45 Afghans who would replace the Pakistani workers. The strategy was to improve on the textile firm’s efficiency so as to reduce costs and invest the savings in the hire of locals. Ariana agreed with the R2J project to pilot a skills development initiative for locals, which would result in more Afghans being able to run the machinery and effectively carry out the required tasks in the factory.

Value Proposition & Activities

30 workers were recruited locally and underwent training to run the factory machines. This training was 2 months in duration and the trainers, recruited from Pakistan, issues certificates of competence once the training was completed.

The newly recruited workers found it motivating that they were paid while being trained, and an added incentive for the trainees was that their pay would increase once they were certified competent. They are employed for 8 hours, with 2 breaks in between shifts, but were also paid overtime on the spot if asked to put in extra hours. Transportation to and from work every day was also provided and the new machines installed in the factory have created a cleaner and safer environment.

Learning & Results

The intervention has had important results. This home-grown solution to business viability has created jobs for locals – 45 men and women now have jobs to support their families and have receiving technical training from the company on yarn and fabric production. The factory now produces cheaper and better quality yarn than the more expensive imports and operation costs for the factory are reduced. There are better opportunities for decent work and scope for replication and expansion – This training of local workers and their subsequent employment is an intervention which can be replicated in many cotton processing factories like ginneries, cotton oil processors and other small textile firms in other provinces.

Ariana Balkh Textiles now produces cheaper and better quality yarn than imports. Khair Khowarkarga is a fabric manufacturer and merchant based in Kabul. He now buys yarn from Ariana Balkh instead of importing it from Pakistan as costs are lower if he buys locally.

“Our major challenge has been irregular supply of yarn , inconsistent and poor quality and high costs of transportation of the yarn. Now we just make a call and our order is delivered. The cost is also lower. We used to pay 230 Afs/kg of yarn from Pakistan excluding transportation. Now we are paying 170 Afs/kg to Ariana…” Khair Khowarkaga, Kabul.

“ I was a truck driver and lost my job two years ago. I have a wife and three children and struggled to provide for them until I got this job. What makes me happy here is I am being trained for two months to man three machines in the yarn production section and I have been promised that my pay will increase as soon as I am certified competent by my trainers from Pakistan. My employers provide transportation to and from work every day. The new machines in this factory suck out dust from the premises. We have a first aid kit box and masks to protect us as well.”

Jelani Abdullah , locally recruited Afghan worker

Conclusion & any future variation

The Road to Jobs intervention has now enabled a number of important positive changes in the market system. Investment in manpower development by Ariana has led to a 30 % reduction in operational costs and allowed them to employ 45 locals. The R2J project has linked Ariana with both the Ministries of Agriculture and Commerce and Industry so they can become more aware of government policy in support of investment in the cotton sector. Senior staff from both ministries visited the factory from Kabul and have pledged support.

Better production rates at the plant will also have a positive impact at the trade and farm levels, as the factory will be purchasing more raw cotton from farmers in the field.  Higher production quantities means that the company is now supplying the national market with yarn and fabric at lower prices which helps to reduce the costs all the way down to the consumers.

Challenges still remain regarding quality and the director of Ariana has commented that this needs to improve to raise customer satisfaction. Tareq Sakhiha has commented that: “…clients are happy with our products and services and that we are working in the industry, but the quality is poor and not so acceptable to them…”  but has reiterated his commitment to the business as having a bright future and that investments would be made in the capacity building of the working team.