Mohammad Qurban Haqjo: Afghanistan – the Silk Road, bursting with opportunity

Afghanistan’s economy is often labeled as a “virgin market.” Years of conflict left the country’s opportunities untapped from foreign investment. However, in the last ten years, the Afghan government has taken decisive steps to attract investment. Firstly, Afghanistan has streamlined the process of registering business with a cur­­rent ranking of 25 in the “Doing Business Report” of the World Bank for starting a business. Secondly, government has strength­ened regulatory provisions in order to improve the economic enabling envi­ron­­ment. But much more remains to be done. Foreign investment remains rightly or wrongly discouraged by secur­ity con­­cerns, weak governance and the dominance of informal arrangements.

Despite the obvious challenges faced by our country, the economy has record­ed high growth rates. On average, GDP in­­creased by ten per cent annually over the last five years. In order to enable sustain­­able economic growth, Afghanistan needs to turn its comparative advantages into competitive­ness to become an attractive location for business and investment. In this regard some progress has been registered. Since 2001, the Afghan govern­­ment has positioned the country as a transit route be­­tween Central Asia and South Asia. Inside this economic corridor, Afghanistan remains the only country that is a party to all regional economic trade arrangements. Cross-border trade agree­­ments that are close to being ratified will reduce tariffs over a period of time, while a transit and transport agreement with Pakistan allows Afghan goods to be exported smoothly to the frontiers of India and China, a combined market in excess of two billion consumers. The reopening of the “New Silk Road” will be facilitated through the reactivation of the International Road Transport Convention (TIR) in the coming months; this transit agreement will en­­hance cross-border trade and connect Afghanistan to neighbouring countries and the world. 

As in the field of trade, Afghanistan is already competitive in priority sectors such as construction, agri­­culture and mining. The reconstruction drive of the country triggered a growing demand for construction materials and services, making the market more attrac­­tive for investors. Currently, the sector is one of the fastest growing in the country. The Asian Development Bank (ADB) esti­mates investments of in excess of four billion US-dollars until 2014 to respond to infrastructure needs. A similar trend can be observed in the housing market. Due to the explosion in urban demogr­aphics, more than 1.5 million residential units need to be built in the next few years.

Agriculture presents itself as further pri­­ority sector for investors. Due to its fer­­tile soils, abundant water resources, and favorable climate conditions, Afghanistan produces high quality organ­ic products, which have excellent market value. Yields on crops such as saffron are estimated to be worth 4,000 US-dollars per kilogramme in international markets. The sector’s poten­­tial is further boosted by the availability of vast tracts of uncultivated arable land for increased production, favour­­able conditions to cultivate more high value organic crops as well as the introduction of farming and storage efficiencies to yield higher revenue per acre of cultivat­ed land. Due to the grow­ing demand on the world food market, the potential investment returns in this sector are significant.

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Finally, the mining sector provides vast investment opportunities. Afghanistan has enormous untapped mineral depos­its, which include copper, iron, ore, coal, hydro­­carbons, gold, and semi-precious gemstones. Estimates, based on surveys by a team from the U.S. Geological Survey, have pegged the value of re­serves at upwards of three trillion US-dollars. Pres­­ently, the government has begun the pro­­cess of granting exploration and extraction rights to foreign and domestic companies. Following a competitive bidding process, rights for one of the biggest potential cop­­per mines in the world, the Ainak Copper Mine, were awarded to a company from the Republic of China. Additional untapped tracts are scheduled to be tendered and awarded for extraction and production in the next six to twelve months. The govern­ment is also forming a Mines Protection Unit to provide security for companies involved in exploration or mining.

In the construction, agriculture and min­­ing sectors, investors will recognize the significant upside investment potential, even after factoring the downside security risk. It is pertinent that any discourse on the state of the economy cannot pre­­clude the state of the country’s security situa­tion. Investors are however encouraged to examine the issue more closely to separate generalisations about security from the safe-haven investment possibil­ities so as to establish a balanced risk tolerance perspective.

Thus, the Afghan investment imperative is compelling. An examina­tion of fundamental and techni­cal data related to the business environ­ment generally shows trends converging to shape the country’s economic aspira­tions, an important measure for poten­tial investors.

Mohammd-Qurban-Haqjo---CEO-of-ACCI-KopieThe author was born in 1977. He received his education in Afghanistan where he grad­­uated in political science from Balkh University. With the social and economic situation in Afghanistan stabilizing, he returned in 2005. In 2008 Mohammad Qurban Haqjo became chief executive officer of ACCI, a position he occupies to date.