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Afghan Sectors
The expectations placed on the private
sector in Afghanistan are high. The private sector is expected to
help fill the gap left by the opium sector by delivering sustained
high levels of growth in an extremely difficult investment
environment, and, moreover, this growth should be “pro-poor” in
nature. There are fears that Afghanistan may not achieve the
hoped-for sustained growth rates of 7–9 percent per year of licit
GDP as the immediate recovery period passes and the high real
exchange rate, the decline of the multiplier effect of the opium
economy, and lack of economic diversification take effect. There is
a real need for further investigation of these growth expectations,
to assess whether they are realistic. High levels of GDP growth in
the medium and long term will be vital to Afghan reconstruction and
development.
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.
Agribusiness
Carpet
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.
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