...And a couple darn fine websites

  • Afghanistan is rebuilding after over 20 years of conflict and is currently transitioning from a state-based model to a free market economy.
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  • The new government is working to improve the country’s physical infrastructure, which was largely destroyed, while at the same time struggling to provide basic services and humanitarian assistance to a growing population with some of the most challenging social indicators in the world.
  • A multi-billion dollar international effort to help reconstruct Afghanistan is underway, led by the United States and other international donors. Many current business opportunities are linked to these reconstruction efforts.
  • In April 2004, President Hamid Karzai declared Afghanistan "open for business." While the Government has taken numerous steps to create attractive conditions for foreign investment, there is much more to be done, particularly in completing the process of reforming the legal and regulatory framework.
  • Economic growth has been dramatic over the past three years. The IMF estimates that official GDP growth averaged 22.5 percent between 2002 and 2004; estimates annual growth in Afghanistan’s 2004/2005 fiscal year (the fiscal year ending March 21, 2005) at 7.5 percent; and projects14 percent growth in FY 2005/2006.
  • Currency reform was completed in early 2003. Since then, inflation has been relatively low and the nominal exchange rate stable. The tax code was restructured and clarified in 2005. Trade has increased dramatically with both imports and exports growing at double-digit levels. Customs tariffs have been rationalized, existing trade agreements have been renewed and new agreements entered into force.
  • The economy is dominated by small-farm agriculture and 80-90 percent of all economic activity remains informal. Illicit opium production remains a major activity and accounts for nearly a third of total licit and illict GDP. The IMF estimates licit GDP at $5.9 billion in FY2004/2005.
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  • Investment is estimated to represent 22 percent of GDP. Over $1.5 billion in new investment has been registered since 2003. The bulk of this figure represents public investment financed through donor aid. One-third of this is foreign direct investment (FDI.) More than half has been in construction and construction material; the remainder split equally among industry and services.
  • Turkey is the largest single investor and accounts for over a fifth of all registered FDI. The United States is second with 17 percent of investment, followed by China and the UAE at less than ten percent and Pakistan and Iran at five percent.
  • The IMF estimates Afghanistan exported $457 million and imported $3.86 billion in FY2005.
  • Afghanistan’s top export markets are Pakistan, India and the European Union. Imports primarily come from China, Japan, Pakistan, the Central Asian Republics and the European Union.
  • The U.S. Department of Commerce estimates U.S. exports to Afghanistan were approximately $257 million and non-assistance related imports were approximately $69 million in 2005.
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  • Afghanistan’s history and location give it the potential to develop into a vital trade and transit hub for the region.

Market Challenges

  • Poor infrastructure, including power, transport and telecommunications.
  • A weak legal framework and judicial and regulatory enforcement.
  • High levels of corruption.
  • Inadequate access to land and to secure land title.
  • A nascent commercial banking system, which provides limited commercial financing.
  • Customs r egulations and procedures that are neither transparent nor uniform.
  • A shortage of skilled labor and trained personnel both in the government and among the workforce.
  • A critical threat security situation.

Market Opportunities

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  • Market opportunities are largely driven by Afghanistan's need to completely renovate its infrastructure. Substantial opportunities for U.S. firms are linked to donor and international finance institution (IFIs, including the World Bank, Asian Development Bank) funded reconstruction efforts. Companies are advised to monitor donor and IFI programs for potential opportunities.

Short-Term Opportunities

  • Architectural, construction, and engineering services
  • Building materials for both residential and commercial properties
  • Computer hardware, software and peripherals (to include Dari language capability)
  • Telecommunications services and equipment
  • Diesel generators for independent power supply
  • Education/training services
  • All consumer products
  • Heavy equipment, including trucks, trailers and buses; motor graders, concrete mixers, heavy-duty dumpers, paver finishers, and bulldozers
  • Security and safety equipment
  • Automobiles/light trucks/vans and development of dealerships for 4x4 vehicles (sales, parts, and service)
  • Translation services, including simultaneous, conference-style translation products
  • Office furniture
  • Printing and publishing

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Medium-Term Opportunities

  • Aircraft and aircraft parts
  • Airport/ground support equipment
  • Electrical power systems
  • Oil and gas field machinery; oil, gas and mineral exploration and production services
  • Agricultural chemicals, machinery, equipment and services
  • Agro-processing
  • Irrigation planning and technologies
  • Road upgrades, lighting and signage
  • Transportation services
  • Carpets and textiles
  • Leather and leather processing
  • Precious and semi-precious stones
  • Marble and natural stone

Market Entry Strategy

Strong local knowledge is a vital part of business development in Afghanistan.

  • Be familiar with key players both in business and in government.
  • Visit the country, get to know your potential partners and their capabilities to do business with U.S. firms, and meet with local chambers of commerce and the Afghan Investment Support Agency (AISA.) Before travel, U.S. citizens should review the Consular Information Sheet and Travel Warning for Afghanistan. These documents can be found at:
  • Personal relationships are everything in Afghanistan, and with the legal and regulatory framework still in a nascent stage, businesses are built almost entirely on trust.