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.
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.
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.
The 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.