Industry minister seeks to put Afghanistan back in business

Q: What are the Afghanistan government’s priorities for economic policy?

A: Afghanistan’s primary goal is to increase per capita GDP and decrease unemployment. In order to do that we have worked in three main areas: to improve the business environment, where we have made some progress according to the World Bank’s Doing Business ranking [where the country stood out as a 'Top 10 Global Improver' in the 2018 edition]; to improve our trade balance, where we have to boost exports, which now stand at below $1bn per year; and to make it easier for domestic and foreign investors to do business here.

Q: How are you going to address the current trade deficit?

A: The predominant imports are primary goods, such as sugar or wheat. We want to increase the acreage and the yields over time so that we can import fewer basic commodities. It is achievable and different from typical imports substitution. Another aspect of this is [our] policy of export-led industrialisation.

In terms of products, we see opportunities in the textile industry, in particular in the ready-made garment subsector, as the cost of labour in countries such as India and China is going up, providing opportunities for neighbouring countries to compete. Also, we are trying to find niche opportunities and add value along the value chain of the produce we already export such as liquorice, among others. We aim to grow exports to about $1.5bn to $2bn.

Q: Afghanistan is widely perceived as a challenging place to do business. What can you do to improve this?

A: There is perception and there is reality. First, Afghanistan is not as bad as some other countries. Murder rates are going down and businessmen in Kabul are not typically targeted by violence. The biggest risk is common criminality, and things such as business environment-type issues. We can improve the situation by working with the minister of interior to develop regulation to provide businesses with better security. It is still difficult to get guns so that we are clearing the bottlenecks for an investor to get an arms licence and more soldiers for his factory.

With regards to exports, transport costs are high, but there are profit margins when you look at trade with Europe. Profit-wise, it makes sense, because Afghanistan is an overlooked market, and for common agriculture products the price differential with markets such as India or Turkey is big enough to make it enticing to producers. However, so far they have been lacking ways to get to market on time and on a consistent basis. Clients also need to be sure their supplies are delivered to on a regular basis.  

Q: What kind of investors are you trying to engage with?

A: Afghanistan is not for everyone. There are two types of profiles we are increasingly targeting. First is regional investors. We export almost nothing to Uzbekistan, Iran and other countries in the region; that needs to change. We should be targeting neighbouring countries and building those trade and investment links.

The further you go out from that regional core, the more you have to find investors that have a higher risk tolerance. Typically, those investors will partner either with the Afghan diaspora or with other investors that have a higher risk appetite. What you find in frontier markets such as Afghanistan is very high profit margins, but very high risks too. It could be an interesting opportunity for those investors with that [higher] risk appetite.