Hans-Jürgen Beerfeltz Afghanistan – a land of opportunity for German companies

In reports or talks about Afghanistan, most people first think of the conflict that has prevailed in many parts of the country. When Afghanistan became the focus of public attention after the attacks of September 11, 2001, a civil war had already been raging in the country under various conditions for more than 20 years. However, it mostly went unnoticed until this point. In the years after the attacks on New York and Washington, news media coverage was concentrated primarily on the military mission in Afghanistan. If nothing else, this one-sided view caused Afghanistan to be perceived by many people in Germany foremost as a country in crisis. There is no doubt that business involvement in Afghanistan is fraught with challenges which should not go unrecognised. But when it comes to these challenges, it is important to note that there are, for example, regional and seasonal differences in the security situation. The level of danger, contrary to popular assumption, is not the same in all parts of the country. For example, the threat in most districts in the northern part of the country, where Germany has special responsibilities, is classified as low. Weak governmental administration abilities and widespread corruption are also often mentioned as obstacles to invest­­ment. Despite this, these problems are not fundamental Afghan phenomena but found unfortunately in many developing countries. In certain projects and programmes of Germany’s Federal Minis­­try for Economic Cooperation and Devel­­opment (BMZ), the battle against corruption and the strengthening of the administration in Afghanistan are being given special attention. German development assistance in Afghanistan therefore aims to improve the general business conditions in the country. Today, “Invest in Afghanistan” is a tremendous opportunity that we at the BMZ want to support in every way possible.

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Focusing entirely on the great challenges still facing Afghanistan does not do this diverse country justice. The brisk economic development of recent years proves that Afghanistan is a land of opportunity. Thanks to a record harvest and significant growth in its services sector, the Afghan economy recorded an economic growth rate of over 20 per cent in 2009/10; in 2010/11, the economy grew by an inflation-adjusted 8.2 per cent.

A significant portion of the gross domestic product (GDP) in agricultural Afghanistan still stems from farming. However, according to the Asian Development Bank (ADB), this percentage declined continuously from 45 per cent in 2002 to 32 per cent in 2008. In the meantime, industry and construction were able to increase their share of GDP to 26 per cent. The increas­ing significance of the service sector showed itself most clearly by generating 42 per cent of the country’s GDP. Some 17 million of the approximately 30 million Afghans now own a mobile phone, for example, while in 2002 there were de facto no mobile phone users in the country. It is no exaggeration to say that the mobile phone sector can justly be called Afgha­­nistan’s boom industry. This creates a frame­­work for many additional innovations.

However, natural resources like iron ore and copper, as well as gold and oil deposits also promise economically inter­­­esting incentives for businesses. The country is rich in lithium deposits, which are among the world’s largest; these are of significance, for example, in the construction of batteries. The Afghan govern­­ment places great value on its transparency in awarding licenses in accordance with the principles in the Extractive Industries Transparency Initiative (EITI) as well as in the transparent administration of the expected revenues. In any event, the poten­­tial that mining offers in Afghanistan could to date only be exploited to a limited extent because of missing infrastructure and an underdeveloped mineral processing in­­dus­­try. In the light of these constraints, foreign inves­­tors, including companies from Germany, are currently concentrating their involve­­­ment on the construction and telecommunications industries, light indus­­try, processing farm products, in addition to the consulting and service sectors. Guided by German values and interests, the Federal Ministry for Economic Co­­op­eration and Development is also providing support specifically in raw materials.

Imports, which are essential for the sur­­vival of many industries, are another factor crucial to the Afghan economy. Goods with a value of around 269 million euros were imported from Germany in 2010. Even though experts predict that the growth rates of Afghan imports seen over the past few years will decline, Afghanistan’s total foreign trade promises to increase as a result of increased transit trade be­­­tween Pakistan and the central Asian repub­­lics, as well as the Afghanistan-Pakistan Transit Trade Agree­­ment (APTTA), which was signed in 2010 and took effect on 12 June 2011.

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Afghanistan is regarded as one of the most investor-friendly countries in Cen­tral Asia, since investment law barely dif­feren­­tiates between domestic and foreign investments. The most notable difference is that foreign investors cannot purchase real estate in Afghanistan; they can only conclude long-term lease contracts. And finally, this friendliness toward investors has led over 90 Ger­man companies to settle in Afghan­­istan since 2001 in order to invest in this growing market. Currently, 45 companies are reg­­is­­tered as “German” or “German-Afghan”. The majority of these companies are in the construction, energy and infrastruc­ture industries, but some provide products and services in consulting, medical technology and telecommunications.

In order to advance business activity in the country, the Afghanistan In­­vest­­ment Support Agency (AISA) was es­­tablished in Sep­­tember 2003 and the Export Pro­­motion Agency Afghanis­tan (EPAA) in September 2006, both with support from Germany’s Federal Minis­­try for Economic Coop­­eration and Devel­­opment. AISA is mainly re­­sponsible for the registration of companies. Since registration requires fewer administra­tive steps than in all other develop­ing countries in the world, and can be com­­pleted in less than a week, the registration activities of AISA are regularly cited by the World Bank’s “Doing Busi­­ness” survey as among the best in the world. The Export Pro­­motion Agency of Afghanistan, EPAA, was created with the goal of promoting the sale and marketing of Afghan products. At pre­­sent, it is concentrat­ing its efforts on the most competitive industries: farm products (especially dried fruit), carpet products and min­­ing industry products (primarily marble and precious stones). Alongside these federal agencies, the Afghan Chamber of Commerce and Industry (ACCI) is an association repre­­senting the interests of private companies in Afghanistan with current­ly over 25,000 members. Among other services, it offers support and advice, including to foreign investors, helping them to successfully get in­­­volved in the country. At present, the European Cham­ber of Commerce in Afghanistan (EUCCA) is being estab­­lished to represent the interests of European com­­panies in Afghanistan in the future.

German companies enjoy an unbeatable advantage when competing with foreign competitors in Af­­ghanistan: Ger­­many is highly re­­garded in Afghan­­istan. German-Afghan friendship goes back to a Ger­man delegation that travelled through the coun­­try in 1915 and 1916. This trip gave the Afghan population the impression that Germany was approach­­ing the country as an equal and was not treating it as a col­­ony. This attitude towards the country can be described today with­­out exaggeration as sustain­able, in the light of almost 100 years of active German-Afghan friend­­ship. It hits a core value that characterises German develop­­ment coope­­ration: the pursuit of a long-term and there­­by sus­­tainable perspective. The German federal government has nearly doubled its finan­­cial contribution for the reconstruction of Afghanistan for 2010 to 2013, with the goal of noticeably im­­prov­ing the develop­­ment perspective for Afgha­­nistan. As a result, German com­­panies already have the opportunity to benefit from Afghan­­istan’s growth while contributing to the country’s devel­­opment. Even in the Hindu Kush, it holds true that a flourishing eco­­no­­my is the best reconstruction programme.

vita_beerfeltz-KopieThe author is State Secretary in the Federal Ministry for Economic Coop­­eration and Development and has been General Secretary of the FDP party from 1995 until 2009. He learned the essential features of development politics during his time as an advisor to the Friedrich Naumann Foundation, and served over 100 international missions in Central and South America as well as in Southeast Asia.