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The Aga Khan, a jet-setter who mixes business and Islam 2007-07-09

Monday, 2007, July 9
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NEW YORK — He is a moderate Muslim religious leader and a descendant of the Prophet Muhammad. He is also a twice-married jet-setter, and he owns hundreds of racehorses, valuable stud farms, an exclusive yacht club on Sardinia and a lavish estate near Paris.

He has poured money into poorer, neglected parts of the world, often into businesses as basic as making fishnets, plastic bags and matches, while also teaming up with private equity powerhouses like the Blackstone Group on a $750 million hydroelectric system in Uganda.

And as he tries to present a less threatening face of Islam on the global business stage during a time of war, the Aga Khan - one of the world's wealthiest Muslim investors - preaches the ethical acquisition and use of wealth and financial aid that promotes economic self-reliance among developing countries and their poorest people.

During a rare interview, the Aga Khan, who is chairman of the Aga Khan Fund for Economic Development, a for-profit company based in Geneva, said he was more concerned with the long-term outcomes of his investments than with short-term profits. Rather than fretting daily over the bottom line, he said, he tried to ensure that his businesses became self-sustaining and achieved stability, which he defined as "operational break-even," within a "logical time frame."

"If you travel the developing world, you see poverty is the driver of tragic despair, and there is the possibility that any means out will be taken," he said by telephone from Paris. By assisting the poor through business, he said, "we are developing protection against extremism."

The company's main purpose "is to contribute to development," he added. "It is not a capitalist enterprise that aims at declaring dividends to its shareholders." Central to his ethos is the notion that his investments can prompt other forms of economic growth within a country or region that results in greater employment and hope for the poor.

Economic developments experts say that the Aga Khan's activities offer a useful template for others - including philanthropists like Bill Gates and George Soros - who are trying to assist the world's poorest by marrying business practices to social goals, but whose foundation work usually stops short of owning businesses outright in poor countries.

Paul Collier, an economist at Oxford University who specializes in the problems of poor countries, said he believed that aid agencies could benefit from operating more like venture capitalists - and more like the Aga Khan. "He gets a multiplier effect from his investments that's really lacking in foreign aid," Collier said. "I'm impressed with his way of accepting risk and thinking long term."

At the same time, the Aga Khan embodies many of the conflicting social and financial tides sweeping the global economy. He is the spiritual leader of the Ismaili Muslim sect, but he is also surrounded by unusual material riches - none of which he or his followers see as a contradiction.

The Aga Khan conceded that he owned two jets, but said that he drove an Audi and that his yacht was 25 years old. Ismailis "wouldn't like to see him living the life of a pauper - we want him to live a decent, an affluent life," said Kris Janowski, the Aga Khan's spokesman. Janowski added that the imam was "surprised that anyone would apply the word 'lavish' to his lifestyle because he doesn't see it as lavish."

Part of the Aga Khan's personal wealth, which his advisers say exceeds $1 billion, comes from a dizzyingly complex system of tithes that some of the world's 15 million Ismaili Muslims pay him each year - an amount that he will not disclose but which may reach hundreds of millions of dollars annually.

The Aga Khan, 70, has had unconditional control of this money since his grandfather placed him in his position 50 years ago. He has invested those resources in a free-form portfolio of 90 businesses that employ more than 36,000 people. These holdings include five-star hotels, cellphone companies and an airline, but most are small and midsize enterprises in Central Asia and the sub-Saharan region of Africa.

"The Aga Khan is making a significant contribution that people too often underestimate - many of his investments have become huge successes, but he's not driven by profit," said Praful Patel, a vice president in Central Asia for the World Bank. "He's treated like a head of state, has access to the highest levels in any country and his gravitas is worth a lot. It allows his outfit to succeed in investments where others cannot."
The Aga Khan was born Prince Karim in 1936 in Geneva. He grew up in Nairobi during World War II, and he attended a Swiss boarding school before he was named imam at age 20.

The Aga Khan's fluency in Western ways - and what he describes as his desire to show that "an imam's responsibilities include caring for the quality of life of the people who he leads, including their economic progress" - animated his first major business venture, the start of a media company in Nairobi in 1961. "The origin of this exercise was the need at the time of British withdrawal from Eastern Africa to have African politics explained to the African public in African terms," he said. "There was no independent media in the region at the time, so we had a delicate mandate but a necessary one."

Over time, his Nairobi company, the Nation Media Group, became the most successful media concern in East Africa, with print, radio and television properties in Tanzania and Uganda as well. The company is profitable and considered among the most professional in Africa, while also offering a voice to government critics.
"If he was a nonsophisticated, profit-only guy, these newspapers and broadcasters would not be the independent voices for the public good that they are," said Andrew Mwenda, a radio commentator and a newspaper columnist in Kampala, the Ugandan capital.

The 1970s and 1980s were difficult times for the Aga Khan's businesses, most of which were in Africa. African leaders nationalized industries. Civil wars broke out. And economies contracted or collapsed. In East Africa, where a large number of Ismailis lived, African leaders blamed outsiders for their troubles. The government evicted most Ismailis from Uganda, while Ismailis in Central Asia suffered under Soviet repression of religious groups."The Cold War was prominent on my horizon all the time," the Aga Khan recalled. "The question I was asking all the time: 'What is going to happen after the Cold War ends?' It wasn't going to be eternal. So we stayed engaged and waited."

With the breakup of the Soviet Union in 1991, the Cold War did end, and the Aga Khan saw fresh opportunities to energize and expand his Ismaili institutions. In Tajikistan in Central Asia, where many Ismailis lived, a civil war created an urgent need for outside assistance, and the Aga Khan rushed charitable resources into the country. More recently, he has invested in power generation and a cellphone company there.

In Uganda, decades of civil war and social collapse came to an end when Yoweri Museveni consolidated political power in the early 1990s.Museveni personally appealed to the Aga Khan to encourage Ismailis to return to Uganda, promising to restore all their properties seized by the deposed dictator, Idi Amin. Many Ismailis returned to Uganda, and so did the Aga Khan's business.

"Uganda is still lacking big-time investors, and the Aga Khan provides some of that," said Moses Byaruhanga, a political adviser to Museveni.

Uganda is home to some of the Aga Khan's most ambitious business enterprises. He owns the largest pharmaceutical company in the country, a tannery, a bank and an insurance company.

And then there is the fishnet factory. On a spring morning in Kampala, amid the pounding noise of textile machines spinning nylon into sturdy nets, Karen Veverica, an aquaculture expert with Auburn University, cradled in her arms a new net, made to her specifications by the Aga Khan's factory. The net is part of her campaign, financed by the U.S. Agency for International Development, to help revive a fish-farming industry in Uganda.
"Fish farmers can't just grow fish out of the blue," she said.
"To get fish out of the pond, we need a net like this."
Making new types of nets represents a classic economic development quandary: there is no demand for the nets, yet without them fish farming cannot take off. New nets, in short, are an unlikely "enabling technology" that might spur growth in the local economy.

But it requires patient investors.

"We can take a decision like this because we think long term," Mahmood Ahmed, the Aga Khan's representative in Uganda, said of the nets. "We won't enter a business without the promise of profit, but we have more considerations than profit."

Financing businesses that could spur economic growth in marginal regions is what the Aga Khan said animated many of his investments.

That has led him, he said, to forgo the merger-and-acquisition plays of Wall Street, to avoid investing in booming domestic economies like China's and to shy away from charitable giving that is not linked to a clear business goal. He said he preferred to put money into unglamorous enterprises that were engines of employment and had great long-term potential - even if profits were not immediate.

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