The Johns Hopkins Gazette: June 21, 1999
June 21, 1999
VOL. 28, NO. 38


SAIS Student Plans "Cultured" Summer in Central Asia

By Greg Rienzi
The Gazette
Johns Hopkins Gazette Online Edition

Ask Andrew Reed what he will be doing over the summer, and he pauses and takes a deep breath. That is before he throws a question right back at you: "Do you have a few minutes?"

Most people are not prepared for Reed's response that he will be starting a yogurt manufacturing business in the former Soviet state of Georgia.

Reed, who just completed his first year at The Paul H. Nitze School of Advanced International Studies, was the inaugural winner of the Ernest Kepper Prize, a venture capital fund administered by SAIS's Central Asia-Caucasus Institute.

Andrew Reed is the inaugural winner of the Ernest Kepper Prize, a venture capital fund.

The fund was created by Ernest Kepper, an international financial consultant and former World Bank official, who contributed $25,000 of his own money to be used as start-up capital for a SAIS student who submits the best business proposal. The business must be located in Central Asia, and those eligible for the prize have to be students who have demonstrated an interest in studying the region.

"As the Internet age or communications revolution progresses, it appears to me that while university graduates are better informed, they are required to be much more entrepreneurial in getting their first job or getting their career started than, say, even 10 years ago," Kepper said. "Access to and the availability of credit for graduates to support them to implement their good ideas, however, appears to be very limited for young people without experience or collateral--and very, very limited for projects in developing or higher risk areas such as Central Asia. This fund, I hope, takes a step in this direction."

Kepper, who has many personal contacts at SAIS, is also a friend of Frederick Starr, a senior research fellow and instructor at the Central Asia-Caucasus Institute.

Both Starr and Kepper thought this fund would provide a unique way for students to learn more about the people and places they are studying, while at the same time encouraging entrepreneurial enterprise in that portion of the world.

"This is a very unusual project. To my knowledge, nothing like this had been tried before. It is a wonderful way of making a link between abstract and analytical studies and the concreteness of daily experience," Starr said. "This is the exact opposite of the high-roller stock manipulation that young Americans have been trying to do in Moscow. Those people aren't creating jobs and productivity. But we hope this will create jobs and products, however modest the scale."

Kepper, who gives much credit to SAIS and Starr for participating in this fund, said this is an opportunity to bring technology and money to a region that is still learning the ropes of a free-market economy.

"Businesses like this could lead to an increase in living standards in this area," said Kepper, who now advises the World Bank in Tokyo. He added that a venture like Reed's would be extremely difficult if he had had to go the route of applying for a loan through an international bank.

"There are always young people with good ideas, but the banks have too many conditions, and it could take up to two years to receive the money. It takes a lot of commitment to go through that," Kepper said.

Reed will set up his yogurt-manufacturing business in the district of Sagaredjo, roughly 40 kilometers from Tbilsi, the capital of Georgia. The equipment needed to produce the yogurt, such as a pasteurizer and cream separator, was purchased from a company in France. Reed said he did a lot of shopping around before he found a company that made machines that were inexpensive and reliable and were also made to "fit" developing countries--that being machines that weren't completely automatic and thus required hands-on labor.

Reed asked for in his proposal, and will receive, $22,000 interest-free. He is not obligated to pay off the loan unless his business succeeds--and Reed is fairly confident that his venture will.

Reed spent five years living in Central Asia, two of them in Georgia, while he was employed with the Community Connections Exchange Program, a government-sponsored program that sends foreign participants to the United States to learn from its professionals. Reed's partner in the yogurt-making venture will be a Tbilsi resident he met during his stay in Georgia.

"I was very impressed by him. He is very knowledgeable about the agriculture and the food-processing situation in the country," said Reed, who is in the Russian Area and East European Studies program at SAIS. "I spoke to him about developing a business proposal, and the two of us came up with this idea."

Reed will start off by manufacturing just plain yogurt and sheep's milk cheese. However, he said, because the equipment he purchased is so versatile, he could expand his business to include production of flavored yogurt, milk, butter and other cheeses. Currently, the yogurt available at most grocery and produce stores in Georgia is imported from Europe. Reed hopes his yogurt will have a mass appeal because it puts money right back into the local economy.

"This yogurt will have Western quality and packaging, but because it's produced locally, I think it's something that people will take to," he said.

Reed, who has just left for France to spend a week learning how to use the manufacturing equipment, will spend two to three months over the summer in Georgia. He said this is an opportunity of a lifetime.

"I've always wanted to start a business in this region because I've seen a lot of opportunities there. This fund gives me the opportunity to do what I wanted because it provides me with a reasonable amount of capital to make the investment," said Reed, who then broke into a smile. "And if it fails, I won't have the bank chasing after me."

Reed, who has no prior business experience, said that he never dreamed he would one day become a yogurt king.

"This is a new direction for me. This could be my career. I'm already thinking, if this works out, I would like to expand this operation and perhaps open up another one in a different region of the former Soviet Union."

Starr shares Reed's optimism.

"We think Reed's yogurt could become the Dannon of the Caucasuses," Starr said. "But whatever happens, he will certainly learn a lot."