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When promoting Afghan exports one has first to remind himself of the age-old export tradition of the country and its specific strengths. However, traditional export markets have changed over the last 20-30 years, foreign competitors have not hesitated to take over market shares once self understandingly belonging to Afghan exporters. Customer and market requirements became much more demanding especially in terms of quality. So, Afghan producers and exporters have to newly understand international market conditions and – at the same time – re-establish market and trade contacts to potential clients. To properly encounter these challenges and substantially increase Afghan exports it is therefore reasonable to build on export potential and capacities in traditional export sectors, while at the same time making all efforts to adjust to international market requirements and demand.
Initially, EPCA focuses on four sectors with traditionally considerable export potential.
Handicraft and Decorative Articles
Marble, Minerals, and Gemstones
Agribusiness
Afghanistan is an agricultural country. The development of the agricultural
sector is therefore pivotal for Afghanistan´s overall development strategy.
The agriculture sector contributes slightly more than half of GDP and employs almost 70 % of the labour force.
Given the seize and the strategic importance of agriculture, the development of the agricultural sector has high priority in all government decisions.
Agriculture production is constrained by an almost total dependence on erratic winter snows and spring rains for water. Relatively little use is made of machines, chemical fertilizer, or pesticides.
The policies aimed at rebuilding agriculture and the efforts of farmers, local communities and agro-business are already starting to bear fruit.
Agricultural production has been substantially increased over the last two years and the various elements of the production and marketing chain are increasingly functioning.
Irrigated areas are rapidly expanding and orchards are being replanted. International support is also strongly geared towards the sector. Further improvements in irrigation systems, fertilizer use, extension services, and improved infrastructure will further translate into increasing production. Support from international donors for the agricultural sector is likely to remain strong over the next years. However, private investment in agriculture and agro-processing has been low. While agriculture represents the biggest sector of the economy, investment in agro-processing only amounts to about 1% of the investment registered in 2004.
The development of an agro-processing industry is closely tied to the development of the agricultural sector. For some agricultural products such as cotton, processing is even crucial, since no alternative demand exists. Thus, increase in demand for processing creates incentives for farmers to increase output and farmers have shown to be very responsive to such price and demand changes. On the other hand, for agro-processing to occur, an increasing and stable supply of agricultural products at attractive prices is a prerequisite for successful investment in agro-processing activities. Improved irrigation, better seeds and extension service have substantial potential to increase production of particular products.
For a variety of Afghan agricultural products regional markets posses a large potential. In particular, Pakistan and India with a population of about 1.3 billion people represent a rapidly growing market. India has been growing at an average of 6 % over the last decade with an accordingly strong growth in import demand. Pakistan has been the destination for 69 % of all Afghan exports, India for about 8 % in 2003/2004. A preferential trade agreement with India has already boosted exports but the potential remains immense. Similar negotiations are going on with other neighbouring countries. Equally interested are the United Arab Emirates, as an export destination. They also serve as a major hub for the entire Middle East region, so that this market is a door opener to many other markets.
The success of various quite diverse countries such as New Zealand, Chile, Turkey, Kenya and others, who have successfully penetrated particular agricultural markets in far way countries demonstrate that in today´s globalization a well directed specialisation can be extremely rewarding.
Given the long tradition, the entrepreneurial spirit of its farmers and traders, and the particular potential of many of Afghanistan´s agricultural product quality, the country possess the prerequisites to re-enter the international markets. However, to be successful in these markets require supplying high-quality products consistently, in strict compliance with phyto-sanitary regulations imposed by the governments of the importing countries. At the same time, the quality / price ratio needs to be internationally competitive.
Carpet
The carpet sector is of strategic importance for the
future development of the Afghan economy. Clearly, with carpet exports
accounting for 47 % of the country´s export earnings in 2002/2003 (IMF 2004),
this sector is a key candidate for increased export earnings.
Carpet weaving is also an important source of income for the rural population, particularly for women. The structure of carpet production is dominated by home production. It typically takes place in the form of some profit-sharing arrangements, where the weavers remain independent producers, or, increasingly, in the form of wage-paid weavers. Within the traditional system, high-quality weaving is often concentrated in particular village, where the necessary skills are passed on within the families. While this preserves ancient traditional designs it is not very open to innovations from the outside and does not offer the possibility for widespread dissemination of skills. Over the last years, a number of carpet factories have been established in urban areas.
Currently, no machine made carpet are being produced in Afghanistan.
An important aspect of the carpet trade is its non-competitive structure. The national and international trade is dominated by few players which have the capital and the information networks necessary for national and international trade. This is reinforced by the structure of trading networks which are often organized along ethnic lines and exclude outsiders. This privileged position gives these traders substantial monopsony power. The fragmented structure and market power of few key actors is reflected in the high mark-ups observed in the trade.
A particular severe problem is the limited direct access to the overseas markets. Currently, most of the production for the overseas market is transported to Pakistan for washing trimming and finishing, and re-exported from there to the overseas markets.
Given the particular skills of the Afghan weavers, the existing traditions and the richness and the uniqueness in designs, a promising strategy should focus on the promotion of high quality carpets made in Afghanistan.
Establishing a unique image of the Afghan carpet industry is a necessary and promising product differentiation strategy that would allow Afghan carpets to re-enter the overseas markets and command a price premium for the Afghan carpets on these markets.
“REVIVING THE TRADITION – SHAPING THE FUTURE”.
This strategy will focus on the quality of the carpets, the tradition, the uniqueness of the design and also capitalize on the mystery that surrounds Afghanistan as a remote place that few know.
Handicrafts and Decorative Articles
Afghanistan has a century old tradition in
furniture making, woodcarving, leatherwork, sewing and jewellery and other
quality handicrafts. Afghan design is unique and respective knowledge is given
from farther to son. Handicraft companies are making currently great efforts to
develop new designs, thereby blending age-old Afghan traditions with
international fashion and demand. However, this can only be achieved while
keeping the unique Afghan taste and work approach - which makes these artefacts
finally exceptional!
Key Items include Jewelry (inc. Turkmen Jewelry, Hazara Jewelry, and more),
Furniture (inc. Nouristan Furniture, Herat Glass, Istalif Pottery and more), and
antique style decorative items (including keepsafes, teapots, marble items, and
more).
Marble, Minerals, and Gemstones
There are substantial quantities of marble
deposits within Afghanistan. The marble that is mined within the country is
typically exported and only a tiny fraction is processed, typically in
handicraft activities, or for local construction use, in Afghanistan.
The minerals industry in Afghanistan is
beginning to show signs of revival after years of conflict and a chronic lack of
investment. The booming construction industry has increased demand for raw
materials, and high metal prices and increased political stability have
increased the interest of mining companies in the country’s undoubted mineral
potential.
Marble
There is a wide variety of marble in Afghanistan currently extracted from quarries in Badakhshan, Balkh, Bamyan, Helmand, heart, Kabul, Kandahar, Logar, Faryab, Wardak, Nabgarhar, Paktia, Parwan and Samangan provinces. Marbles developed in rocks of Proterozoic age are considered to be the highest quality for use as dimension stone. Marble deposits can be found in the provinces of Kabul, Logar, Wardak, Badakhan, Herat, and Nangarhar amongst others.
Onyx marble.
Onyx is a banded variety of chalcedony, a cryptocrystalline form of quartz. Onyx is highly valued as a high quality marble and the colour of its bands range from white to almost every other colour. Afghan onyx is quarried from several provinces including Bamyan, Helmand and Faryab, with colours including shades of yellow, green or brown. Some of these may in fact be a variety of aragonite (calcium carbonate) called travertine, however the traditional name of onyx has remained in place and is still used to this day.
The Chesht and Khogiani marble are currently worked for dimension stone and have been favourably compared to Carrara marble, an Italian marble recognised to be one of the finest in the world.
During the past five years the political situation in the country has stabilised. Democratic Presidential and parliamentary elections were held peacefully in 2004 and 2005 – the first such elections for over 30 years. The government, with the help of the international community, has passed a raft of essential new laws and begun to reform the civil service. One result of this reform process has been a new Minerals Law, which was written with the assistance of the World Bank and passed in July 2005. The new law aims to encourage investment by local and international companies and changes the role of the Ministry of Mines and Industries (MMI) from a state-run minerals producer to a regulatory and promotional organisation. Although security is a problem in the south and east of the country, most of the northern provinces are stable, with few security concerns that would affect mineral exploration.
The country is well endowed with minerals, which include copper, gold, iron ore, chromium, precious and semi-precious stones, industrial minerals, coal, oil and natural gas. Despite decades of turmoil, most of the records of the Russian exploration work carried in the 1970s and 1980s still exist in the Afghanistan Geological Survey, which now occupies a newly refurbished building in Kabul. These records form an essential archive and the basis for more modern exploration techniques that have not been applied in much of the country.
Afghanistan sits astride the collision zone between the Eurasian and Indian tectonic plates and its geology is complex. The northern part of the country contains most of the known hydrocarbon resources and forms part of the Eurasian platform; a succession of small blocks that originally formed part of the Gondwana supercontinent have accreted on to its southern margin before the final docking with the Indian plate in Miocene times. These complex processes have led to a wide variety of mineral-deposit styles ranging from sediment-hosted copper to porphyry Cu-Au, epithermal gold and pegmatite-hosted rare-metal and gem deposits.
Copper:
The Aynak copper deposit is situated about 35 km south of Kabul and is a very large, stratabound deposit hosted by Vendian-Lower Cambrian carbonate rocks of the Kabul Block. Extensive Russian exploration was carried out on the prospect in the 1970s and 1980s, including 120 km of drilling. Historic inferred resources are 240 Mt of ore at an average grade of 2.3% Cu. The MMI is going out to international tender for the rights to the deposit and Tender Advisors have been appointed to manage the tender process, which should be completed in 2006. Development of this deposit will give a dramatic boost to the mining industry in Afghanistan and encourage further exploration for copper in the Kabul Block.
Gold:
There are a large number of gold occurrences in the country, including a notable number in a belt extending southwest from Ghazni to Zabul and Kandahar. Although many are described as Cu-Au skarn deposits, the close association with Miocene granites and porphyries shows that they are more closely related to porphyry-style Cu-Au deposits, and form part of the Tethyan Metallogenic Belt extending from the Carpathians, through Eastern Turkey, Iran (Songun, Sar Chesmeh) and Pakistan (Reko Diq).
Other prospective areas include the Herat area, where a small UK junior company is reported to have signed an exploration licence agreement with the MMI. Another gold deposit, in Baghlan Province, is believed to be under negotiation. In a country with poor infrastructure, gold exploration may be the most attractive option for small mining companies.
Iron ore:
A large iron-ore deposit has been outlined at Hajigak, 100 km west of Kabul in Bamyan Province. The deposit extends for 32 km along strike, is up to 380 m wide and has been traced down dip for 550 m. The surface ore is haematitic but below 100 m the orebody comprises magnetite plus some pyrite and chalcopyrite, and averages 61.3% Fe. Resources are estimated at 1,700 Mt of ore. Export of the iron-ore would be difficult but the presence of good quality coal not far to the north could form the basis for an integrated iron and steel plant supplying the domestic and export markets.
Chromium:
A number of chromite deposits occur in Afghanistan, the best known being near Logar, some 40 km south of Kabul. This deposit occurs in the Logar ophiolite, which was obducted on to the Kabul Block in the Eocene. A number of small lensoid bodies are known and an estimated, near surface resource of 180,000 t at 42.4% Cr2O3 has been outlined. In addition, small-scale working of chromite from an Eocene peridotite is reported from Paktia Province, with the ore being exported to Pakistan.
Uranium:
Afghanistan formerly produced uranium from the mountains of Khawaja Rawash north of Kabul after the discovery of deposits in 1983. Soviet engineers were also said to be mining uranium at Koh Mir Daoud, between Herat and Shindand, and also in the Khakriz area of Kandahar Province. Very little information on this work is available but Afghanistan has a high potential for further discoveries.
Precious and semi-precious stones
A number of semi-precious stones are currently exploited in Afghanistan, the most famous being lapis lazuli from the Sary-Sang deposit in Badakhshan. Production figures are difficult to determine but are thought to be around 9,000 kg/y, with speculative reserves of 1,300 t. Most of the material is exported to Pakistan where it is cut and polished. A wide variety of gemstones are known, including emerald, ruby, sapphire, aquamarine, kunzite, garnet and tourmaline. Emeralds are worked on a small scale in the Panjsher Valley, and most of the annual production, worth an estimated US$9-12 million, is traded through Peshawar.
Construction and industrial minerals:
Building and reconstruction work in Kabul has increased demand for aggregate minerals, with hard rock and alluvial sand and gravel being exploited. A major road-building programme linking Kabul to the main cities has also increased the demand for roadstone and rockfill.
The marble industry has a long history in the country and a variety of white, grey, black, pink and green marbles are exploited, but poor extraction methods using explosives have hindered production. Increased investment in new machinery and better training will be needed to increase production of blocks for export or for cutting and polishing locally.
Salt is produced on a small scale in the north of the country near the Tajikistan border. Deposits of barite, fluorite and gypsum have been exploited to a limited extent.
Coal
Coal is presently exploited at Karar in the Pul-e-Khumri; at Ishputa near Doshi; and Dar-e-Suf to the south of Mazar. Current production is probably below the historical level of 180,000 t/y and is hindered by obsolescent and broken equipment. The coal is used for local power generation and the cement industry but good coking coal at the last named locality could be used for blast furnaces.
Oil and gas
Afghanistan`s untapped oil and natural gas reserves may be significantly larger than previously thought. The USGS estimates that the upper range of Afghanistan`s unproven oil reserves roughly matches Sudan`s. The USGS survey shows that two northern regions could contain as much as 1.6 billion barrels of oil, and 15.7 trillion cubic feet of natural gas. Much of the petroleum resource potential of Afghanistan and all of the known crude oil and natural gas reserves are in northern Afghanistan, located in parts of two geologic basins – the Amu Darya Basin to the west and the Afghan-Tajik Basin to the east. Most of the undiscovered crude oil is believed to be in the Afghan-Tajik Basin, and most of the undiscovered natural gas in the Amu Darya Basin.
The government passed a hydrocarbons law in 2005 that grants the Afghan State full control over these resources, but allows fully foreign-owned companies to lease, explore, and develop oil and gas fields, subject to negotiable royalties contracts. Afghanistan is drawing up oil and gas exploration blocks and will soon be seeking production-sharing agreements with foreign companies to develop what it hopes are larger-than-expected reserves.