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Afghanistan’s Trade Trajectory on 100th year of Independence

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Afghanistan

Afghanistan is at an interesting crossroads due to its important strategic location connecting South Asia with Central Asia which is greater assimilation amongst the world, writes Neelapu Shanti for Elets News Network in this special article on Afghanistan’s 100th year of independence.

Marking Afghanistan’s 100th years of Independence, it is important to understand the enthusiastic drivers that are constantly elevating the country’s stand with the fast-growing economies and acknowledging Afghanistan in the new world order. Given the ongoing challenges backed by the development steps, Afghanistan will be etched in the history of the world as an epoch event bringing the government’s thrust on education, improved trade and investment, skill development measures.

Afghanistan’s reform primarily in trade and investment sector has been trying to untangle their economy affected by war and conflict. Afghanistan is at the interesting crossroads due to its important strategic location connecting South Asia with Central Asia which is greater assimilation amongst the world. Afghanistan’s position can be regained by creating levers that will ensure equanimity and equal opportunity in the world.

Facing strong headwinds Afghanistan stands tall, concurrently mitigating the factors for growth and development. The prism of inclusive growth of Afghanistan is manifesting in myriad ways. Reflecting on trade and investment, Afghanistan’s progress shows a marked improvement by securing 164th position at Doing Business Index (DBI) in 2018 of the World Bank.

More importantly, this index reflects Afghanistan’s potential to change the business landscape over the years for enduring welfare of its people. Completing 100th years of Independence, Afghanistan aspires for inclusive development, rejuvenate, and recalibrate its historical legacy and taking pride about the progress, the country has made in spite troubled times.

Afghanistan’s trade and investment has accelerated at a considerable rate. As per the World Bank report 2017, Afghanistan’s Gross Domestic Product (GDP) stood at 2.8 billion USD. In 2018 Afghanistan’s export accounted for 824 Million USD. Afghanistan has the immense calibre to become an economic force in the world.

The mammoth task is achievable by bringing peace and regional cooperation. While the aspiration levels of Afghanistan have been going up through successive projects to name a few are air corridor programme, Chabahar port, Salma Dam Irrigation project, small development projects among others which are in the pipeline include CASA-1000, TAPI, TUTAP and TAP.

Afghanistan’s greatest potential is in the mining sector and has immense oil and gas reserves which are yet to be exploited. The revival of cottage industry and micro, small and medium enterprises related to food and dairy processing, textile, handicrafts, carpet, leather, animal meat and fibre, semi-precious stones and marbles.

Afghanistan’s trade and investment Strengths

The uniqueness of Afghanistan’s trade dimensions is intensifying the regional market demands. Afghanistan’s connectivity potential has been improving tremendously for the past two years.

Agriculture

Agriculture sector lies at the heart of socio-economic change and empowerment aims to place the country at a valuable platform with relatively well-functioning markets- exports as well as domestic value chains. Afghanistan’s horticultural crops and intensive livestock are profitable in the market.

Around 80 percent of the country’s population is involved in Agricultural activity which is paramount making growth inclusive, equitable and participative. Afghanistan’s main crops include wheat, corn, barley, rice, grapes, fruits (apples, pears, pomegranate, almond, pistachios, apricots), vegetables, potatoes, onions, saffron, oil seeds including cotton, soybean and canola.

The Agricultural sector contributes to about a quarter of the country’s GDP. Under the ambit of  the Ministry of Agriculture, Livestock and Irrigation (MAIL) has announced eight projects for investment for which the government is encouraging to provide required support and cooperation which include saffron value chain development, Afghan Dairy Industry Development (ADID), Agricultural Cold Storage project, establishment of fruit packing and storage complex,  establishment of pine nut processing centre, modern slaughterhouses, operation and maintenance of established modern slaughterhouses. Afghanistan’s fresh and dried fruits have an outstanding reputation in a region that creates a large market of Afghani goods.

Energy 

Incentivising robust investment in the energy sector, Afghanistan has the potential to produce 3,10,000 megawatts of electricity as per the Ministry of Energy and Water of Afghanistan. Afghanistan has investment an opportunity of about 4834.42 million USD.  Afghanistan is endowed with natural resources and its capacity to produce energy is extremely high and undaunted.

Incentivising robust investment in the energy sector, Afghanistan has the potential to produce 310,000 megawatts of electricity as per the Ministry of Energy and Water of Afghanistan while currently, it imports 75 percent of its electricity from abroad and produces very little domestically.  Afghanistan needs 6,000 megawatts of electricity annually, and if it reaches its full potential of production (3,10,000 megawatts), there will be a large amount of surplus energy ready to be exported to the neighboring countries. Afghanistan has investment opportunity of about 4834.42 million USD.

Afghanistan’s energy market provides an excellent investment opportunity because so far there is lack of competition in this area. Furthermore, solar energy is another investment opportunity in Afghanistan.  The country has more than 300 sunny days in a year, therefore, making the solar energy a cheap, obtainable and renewable source of energy.

Mining 

A huge untapped potential exists in the mining sector of Afghanistan as the country holds a capacity of more than 1 trillion USD worth of mineral deposits. The country has world class deposits of iron ore, copper, gold rare earth minerals and a host of other natural resources. The High Economic Council has approved 38 mining project for investment in Afghanistan and soon the tendering schedule will be announced.

Telecommunication

At present Afghanistan’s mobile telecommunication market is served by four private companies and one public company, with private firm investment up to USD 2 billion. With more than 25 million subscribers, mobile phone networks cover about 90 percent of the total population. The ministry of Information technology has prepared an “open access” policy. This policy provides investment opportunities for domestic and foreign companies in establishing optic fibre network and internet service providing.  Furthermore, the policy works toward proper regulation of the industry and providing equal opportunities for all investors.

Connectivity Potential

Afghanistan’s transport system consists of road transport, civil aviation, railways and inland waterways. In 2014- 2015 road transport generated 7.344 million ton-Km, while fledgling railways with its short 75 km line produced about 100 million ton-Km. Afghanistan’s connectivity potential has been improving tremendously for the past two years.

Air Corridor programme

The key to connectivity is launched with the operationalisation of the air corridor programme between Afghanistan and India since 2017, connecting to Mumbai, New Delhi, Hyderabad, Amritsar and Kolkata with Kabul and Kandahar.  The country also connects with UAE, China, Saudi Arabia and Turkey. With the increasing frequency of the Afghanistan air corridor programme reflects a positive overview of the broader economic dimension between different nations and very soon Afghanistan will be connected to Indonesia through this air corridor programme.

Chabahar Port

The Chabahar port connectivity is an important milestone in connecting Afghanistan with India in particular. As per the Afghan Ministry of Economy strategy on productive Afghanistan is proposed to elevate by commercialization with new modalities that strengthen the competitive advantage of the private sector, including a gear shift towards larger-scale commercial activities.

Five Nations Railway Project

Afghanistan’s three dry ports which are linked with railways to Turkmenistan and Uzbekistan and the fourth railway linkage with Iran is underway to connect with Afghanistan, India, Central Asia and China to the port of Chabahar.

Afghanistan is consistently supporting its active participation in regional linkages and cooperation mechanisms. Economic and trade cooperation is growing dramatically in Afghanistan. Development cooperation and joint efforts in trade and investment including education training, culture, and people-to-people exchanges are deepening, creating an enduring social foundation enduring ties in the region. Afghanistan has entered in the new period of development and this requires renewed efforts and determination from the regional countries to realise always greater achievements and live up to the expectations.

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