Business and Investment

Afghanistan is going through one of the most crucial phases of its economy. Since 2002, the private sector in the country has flourished and more than US$12.1 billion have been registered as initial capital for investments, whereas the actual investments could reach to US$25-30 billion, in all 6 major sectors of the economy.

Afghanistan since a decade and half has made enormous progress across all sectors that continues today under the pro-business and investment leadership of the National Unity Government. We are building infrastructure, bringing major reforms in our justice system, fighting corruption, building institutions, over 9 million go to school, addressing women violence and opening up new opportunities for women, forging regional economic and trade partnerships, and capitalizing on our abundant natural resources and advantageous position at the heart of Central, South, and East Asia.

The major sectors of the economy are; agriculture​; industry, and services. Over the last more than a decade growth has largely been concentrated in four sectors: transport & communications; construction; manufacturing and government services. However, in the last five years, the Afghan economy has begun to diversify its economic sectors. Key areas of new growth include Carpets, Cashmere; Rolled steel; Mining; Agri-business; Marble and construction materials; Medicinal plants; Fresh and dried fruits; Aviation; and Telecoms.

In October 2016, the Government presented the new Afghanistan​ National Peace and Development Framework (ANPDF) at​ the Brussels Conference on Afghanistan (BCA). At the conference, attended by representatives of around 70 countries and 30 international organizations, development aid of $3.8 billion per year was committed to support the government reform agenda and economic-driven foreign policy.

With significant reform efforts and donor support, Afghanistan has maintained macroeconomic stability, implemented important structural reforms, built policy buffers and a comfortable reserve position, lowered debt and inflation, created a balanced budget, and made progress toward achieving social and development objectives, including the Millennium Development Goals (MDGs).

On July 29, Afghanistan reached an economic milestone by becoming the newest member of the World Trade Organization. In doing so, we reaffirmed our commitment to free-market principles. There has never been a better time to invest in or do business with Afghanistan. As we grow, you grow.

The links below contain all the information you need to get started.

Other Supporting Links:

  • MoCI: Ministry of Commerce and Industries of Afghanistan
  • MoMP: Ministry of Mining and Petroleum
  • MAIL: Ministry of Agriculture, Irrigation and Livestock
  • MSP:
  • MoPW: Ministry of Public Works
  • MoFA:

Main Arguments to Invest in Afghanistan:

Since 2002, the economy has been growing at more than 10% per year. This growth has been volatile – in part because of a continued reliance on agriculture (still 23% of GDP) which is subject to weather-related fluctuations – with very high rates of 21% recorded in 2009 and 14.4% in 2012 and lower rates of 6.1% and 4.2% recorded in 2011 and 2013. The economy is forecast to grow by 2.6% in 2017 only slightly changed from what was achieved 2.2% in 2016. GDP is now $20.3 billion (2017) with per capita income of $614 per year. The major sectors of the economy are; agriculture 23%; industry: 21.1%; Services: 51.6% and tax on import 4.2%. Over the last more than a decade growth has largely been concentrated in four sectors: transport & communications; construction; manufacturing and government services. However, in the last five years, the Afghan economy has begun to diversify away from traditional areas. Key areas of new growth include Cashmere; Rolled steel; Mining; Agri-business; Marble and construction materials; Medicinal plants; Fresh and dried fruits; Aviation; and Telecoms.

Afghanistan’s Government continued to pursue its ambitious reform agenda. In October 2016, the Government presented the new Afghanistan National Peace and Development Framework (ANPDF) at the Brussels Conference on Afghanistan (BCA). At the conference, attended by representatives of around 70 countries and 30 international organizations, development aid of $3.8 billion per year was committed. Recent growth rates are likely to be sustained in the future and may even increase as a result of population growth of 2.4%, development of Afghanistan’s mining and petroleum sectors which have been valued to $3 trillion.  Having said that, there are plentiful counter factors which encourage investors to invest in Afghanistan. They are explained below:

1.  Commitment to Private Sector Development

The Government has adopted a pro-private sector stance and a liberal trade regime and has taken many steps to create attractive conditions for foreign investment including; ensuring fiscal and economic stability, creating a stable currency and liberal foreign exchange regime, simple, low, cost-effective taxation arrangement, an open liberal trading regime, an open, liberal investment regime, a modern legal framework.

2.  Creating the Infrastructure for Growth

The Government takes seriously its responsibility to ensure that infrastructure is adequate and that necessary skills and services are readily available. Since 2002 it has built the basic infrastructure necessary to support a modern economy in terms of roads, electricity, and water and railways which include Ring Road around Afghanistan which has been open for a number of years. New generation capacity will be opening this year in a number of areas and improved transmission lines have enabled increased imports of electricity from neighbouring countries.  A railway link connecting Afghanistan to Uzbekistan’s rail network and to regional markets in Europe and Asia has been completed, building six industrial parks which are now operational in Kabul, Kandahar, Herat, Helmand, Bagrami, and Mazar-i-Sharif.

3.    Growth in Exports

Exports have grown strongly albeit from a low base rising from $69 million in 2002 to $596 million in 2016. The Government sees increasing non-mineral exports as a central plank of its economic development strategy. Significant donor support is available to help businesses – particularly SMEs – enter into new markets. Dry fruits, carpets, medicinal plants, and animal by-products (such as wool, skin, etc.) were some of the items that saw a major increase in recorded exports. Other key exports include carpets, marble, and fruit. Afghanistan has signed a number of free trade agreements including joining the South Asia Free Trade Agreement, Trade and Transit Agreement, with Pakistan and a Preferential Trade Agreement with India. Afghanistan has joined the multilateral trading system of World Trade Organization (WTO) recently. It has preferential access to a number of large markets in the developed world including the USA and Europe under anything but arms arrangements. Afghanistan‘s top export markets are India, Pakistan, UAE, Iran, Saudi Arabia, Central Asia and the EU.

4.    Continued Support from Donor Community

Increasingly donors see sustainable economic growth as critical to Afghanistan’s long-term prospects. As a result, substantial levels of aid are being directed towards this end including World Bank and USAID and other donors support

  1. Investment Opportunities in Afghanistan

Afghanistan offers very good opportunities for the investors to invest in this country. These opportunities are indicated as below:

More detail on investment climate and opportunities from the Afghanistan Investment Support Agency: http://investinafghanistan.af/en/

http://www.doingbusiness.org/data/exploreeconomies/afghanistan/ 

B.   A. Investment Opportunities in Afghanistan

Afghanistan offers very good opportunities for the investors to invest in this country. These opportunities are indicated as below:

More detail on investment climate and opportunities from the Afghanistan Investment Support Agency: http://investinafghanistan.af/en/

http://www.doingbusiness.org/data/exploreeconomies/afghanistan/

The bellow-given link to “Investment in Afghanistan” video should be put in play on the introduction page of the business and investment section.

https://www.youtube.com/watch?v=proiFtFYMq

Doing Business Law Library – Afghanistan:

Links to business laws and regulations collated by the World Bank and Ministry of Commerce and Industries. Topics include:

Ministry of Commerce and Industries. http://moci.gov.af/en/page/7565

  • Law of Investment
  • Law of Commerce
  • Law of Commercial Arbitration
  • Law of Tax on Consumers and Goods
  • Law of Petroleum and Gaz
  • Law of Business Trademarks

World Bank: http://www.doingbusiness.org/law-library/afghanistan

  • banking and credit laws
  • bankruptcy and collateral laws
  • commercial and company laws
  • labour laws
  • land and building laws
  • securities laws
  • tax laws
  • trade laws

Afghanistan is one of the few countries in the world which has not had its mineral and petroleum resources comprehensively explored and mapped. For many minerals, the resources that have been identified are globally significant with known and potential deposits of a wide variety of minerals ranging from copper, iron, and sulfur to bauxite, lithium, and rare-earth elements. Estimates based on surveys by a team from the US Geological Survey put the value of reserves at upwards of US$ three trillion dollars. In addition, there are substantial reserves of oil and natural gas. In December 2011, Afghanistan signed an oil exploration contract with China National Petroleum Corporation (CNPC) for the development of three oil fields along the Amu Darya river. CNPC began Afghan oil production in October 2012 and is now extracting 1.5 million barrels of oil annually.

Afghanistan is moving towards developing a world-class Mining Agreement which will include: a clear grant of rights and statement of obligations of both parties; detailed dispute resolution provisions and procedures; detail on plans for exploration/exploitation of a deposit (it is unlikely that, by the time of the tender, an investor will have been able to produce a detailed development plan); and detailed provisions in connection with environmental management (including compliance with IFC/Equator/other international standards). In this sector, there is a huge potential of businesses like copper, coal, gemstones, gold, iron ore, lithium, beryllium rare earth elements and uranium.

The construction sector has expanded rapidly since the end of the war in 2001 and has continued to be a significant driver of economic growth throughout the last decade. Recently it has comprised around 8-10% of national GDP, or around $1.6-1.8 billion. This includes demand from the reconstruction programme, the international presence (including military), as well as a massive increase in private construction. Most of the construction projects go to countries other than Afghanistan, as large international companies are often the main contractor, with little value cascaded down to Afghan sub-contractors.

Moreover, around two-thirds of building materials are imported to Afghanistan from Pakistan, Russia, and to a lesser degree China and the UAE. There is ample room for import substitution and for Afghanistan based contractors to grow quickly. Building materials include cement, steel, bricks, tiles, sand and aggregates, fixtures and fittings, timber and wood, paints and chemicals and construction equipment. As shown above, these materials represent 35% to 45% of the value of the construction market, hence an estimated US$2.7 to 3.5 billion per year. The overwhelming majority of that money (92%) goes towards the following four inputs: metals, cement, bricks and sand and aggregate. Afghanistan has huge potential for investment in the areas of metal, cement, bricks, sand and aggregate, wood, gypsum, doors and windows, tiles, asphalt, higher-end materials, labors and trades and large infrastructure project.

Key areas that are likely to see concerted activity over the next 50 years include building a railway network, expanding the road network, improving energy supply and enhancing the electricity and enhancing regional integration.

Afghanistan has opportunities for business and investment for SMEs in areas such as carpet, cashmere, and handicrafts. Afghanistan is one of three countries where significant amounts of cashmere are produced. In 2011 Afghanistan produced 1200 metric tonnes valued at $25 million. This was 7% of global supply. It is estimated that 30% of Afghan cashmere-producing goats are being harvested with the remaining 70% of Afghan goat farmers unaware of the value of cashmere or the channels for trading the product. However, with a goat population of 7.3 million, there is still potential for Afghanistan to increase the volume of cashmere it produces by focusing on improving harvesting techniques and establishing clear market linkages for producers. Afghanistan has a long tradition of handmade carpets including Chob Rung (pile and knotted carpets made from wool, silk, and cotton); Kilims (non-pile fabric woven carpets), and felted woolen carpets. Afghanistan produces approximately 1.6m of carpet per year. The sector represents Afghanistan’s largest official export, generating $150 million annually and constituting 15% of carpet exports globally.

The agricultural sector constitutes an estimated 30 % of Afghanistan’s GDP, with around 85% of the Afghan population dependent on agriculture and agriculture-related activities for their livelihoods. At one-time, high quality Afghan agricultural product exports such as dried fruits, nuts, almonds and pistachios occupied a prominent share of the world market. Following almost three decades of conflict, farmers in Afghanistan have recently made great strides in reviving agro-business in the country.

Development of the agricultural sector is a high priority of the government and is the focus of international donor efforts to revive rural economic activity. Improvements in irrigation systems, fertilizer use, and extension services have increased production and reduced input prices. The domestic market potential for agricultural products is huge and demand is increasing with a rise in population and income across the country. Currently, most processed food is being imported. With rapidly improving supply conditions for agricultural products, there is a large potential for import competition and early entrants stand to benefit as the first domestic suppliers of their products.

In addition, Afghan agricultural products represent a valuable export product for investors, particularly in regional markets such as India and Pakistan. There are also significant opportunities in cold and dry storage, processing, particularly cleaning and packaging and in other elements of the value chain such as testing and certification for both international and domestic markets. There are a large number of sub-sectors. At the moment there are few cold storage facilities in Afghanistan. As the agro-business sector strengthens and power and fuel supplies become more reliable, cold storage and cold transportation represent one area where investment and technology could achieve strong export growth and ROI.

B.   Services

In the services sector, Afghanistan also offers opportunities for investments which are explained below:

Da Afghanistan Bank has licensed 12 commercial banks to date. Out of twelve, seven banks are full-fledged commercial banks and the remaining five are branches of foreign banks. The full-fledged commercial banks include: Bank-e-Millie Afghan or National Bank (parastatal bank); Pashtany Tejarati Bank or Pashtany Commercial Bank (parastatal bank); Export Promotion Bank (parastatal bank); First Microfinance Bank (an Aga Khan/IFC joint venture); Kabul Bank (a solely Afghan-owned bank); Afghanistan International Bank (an ING-affiliated enterprise with American equity); and, Arian Bank (joint venture of Bank-e-Mille “National Bank” of Iran and Bank-e-Saderat “Export Bank” of Iran). The branches of foreign banks include: Standard Chartered Bank (UK); National Bank of Pakistan (Pakistan); Habib Bank Limited (Pakistan); Punjab National Bank of India (India); and Bank Alfalah Limited (Pakistan). There is a small number of non-bank financial institutions (11 micro-finance institutions, one credit union and one leasing company), but these institutions meet only a small fraction of credit needs. There are no credit bureaus or credit rating agencies.

Standard Chartered Bank of the United Kingdom opened for business in Afghanistan in January 2004 with an initial investment of USD 1.5 million. They are one of the pioneering banks in Afghanistan that have introduced modern banking facilities to the country. They aim to roll out full-service facilities, including automatic teller machines, internet banking, and cash management services in all 32 provinces. Currently, they cater to more than 3500 customers including both corporate and retail clients.

Four mobile telecommunications service providers have invested $2 billion in Afghanistan and currently supply the Afghan market. Competition has increased and there is pressure on prices. By early 2014, the number of mobile telephone subscriptions was estimated to be about twenty million, and the mobile telephone networks covered about 90 percent of the population. The reach of mobile telephony – where more than half of Afghan households have at least one mobile telephone – was achieved through private sector participation. The telecommunications revolution in Afghanistan has been one of the success stories of the country‘s recent past.

While there are still growth opportunities for mobile service providers, significant market opportunities exist in the other supply and service areas of the telecommunication sector, including data processing, basic business-processing operations, information and communication technology, data transfer and process control. Internet users are only about five percent of the population and services are limited to major urban areas, such as Kabul, Herat, and Mazar-e-Sharif.  Investments in the IT sector are particularly attractive as they often do not depend on the overall infrastructure of Afghanistan such as roads and airports because investors can develop and rely on their own infrastructure such as satellite communication equipment.

Afghanistan has long been a trade hub connecting Asia, Europe, and the Middle East. A landlocked country bordering Iran, Turkmenistan, Uzbekistan, Tajikistan, China, and Pakistan, it is considered a land bridge‖ connecting trading partners and offering a point of access to an expanded regional market of more than two billion people. In addition, this sector represents a vital support industry to other sectors which will not be able to achieve growth without an upgraded transportation and logistics industry.  Opportunities exist in areas such as; Cold cargo and perishables storage, Overland transportation, Truck maintenance, Customs facilitation, Air freight and cargo services, Package and document delivery, Procurement and supply, Warehousing and Transport and Logistics.

C.   Other Priority Sectors

Many other sectors have been identified which have potential. Some of these sectors are significant and are important now; others are tiny and may present opportunities for the future. These include labour-intensive manufacturing, film industry, tourism and hospitality, textiles and fashion. We can conclude there are numerous investment opportunities in Afghanistan and huge potential for investors to make a profit for themselves as well as for Afghanistan. Therefore, on behalf of the Government of Afghanistan, MOCI welcome regional and global investors to harvest investment opportunities in Afghanistan.