Beyond headlines that are increasingly dominated by the Taliban’s strengthening insurgency, there is some good economic news coming out of Afghanistan.
Buoyed by strong year-on-year growth in foreign direct investment, Afghanistan has been enjoying double-digit growth since 2002. The World Bank predicts that in 2008, the GDP growth rate could reach 13 percent.
Robust growth, it must be admitted, tells only part of Afghanistan’s economic story. Decades of foreign occupation and internal strife left the country’s economic infrastructure in ruins at the outset of the 21st century. So once the US-led coalition ousted the radical Islamic Taliban movement from Kabul in late 2001, an economic boom was inevitable: when starting from a point near zero, it is relatively easy to achieve rapid progress. At the same time, it is important to stress that a majority of Afghans continue to struggle below the poverty line.
A key aspect to Afghanistan’s democratization, and the eventual defeat of radical Islamic militants, is maintaining the growth pace. Daunting hurdles, especially in the security sphere, must be overcome. The January 14 terrorist attack/suicide bombing at the Serena Hotel in Kabul appears to have shaken the confidence of many in the international community. And Afghan President Hamid Karzai — appearing at the World Economic Forum in Davos, Switzerland, on January 24 — warned that the level of Islamic radicalism is reaching hazardous levels. “It seems like the mutant of extremism is dangerously unleashed across the region,” the Afghan president said, adding that the prevailing pattern “bodes terribly badly for the whole world.” The government in Kabul is doing what it can to keep investors interested in Afghanistan. The current legislative framework, for example, allows for 100 percent foreign ownership, full transferability of profits outside the country, international dispute resolution mechanisms and streamlined investment licensing procedures. In addition, the Afghan Investment Support Agency (AISA) is designed to help investors negotiate government regulatory and licensing procedures. The agency also oversees the construction of industrial parks — providing an additional measure of security to businesses that launch operations in the country.
Afghanistan offers investors several advantages over other developing nations in the region. Foreign corporations in Afghanistan, for instance, do not have to compete with subsidized government-owned businesses, and therefore they are able to maximize profits. Among Afghanistan’s most lucrative investment sectors are exploration and extraction of natural resources; construction and reconstruction of infrastructure; agriculture and agribusiness; transportation and logistics; power generation and distribution; water supply and management; and telecommunications.
Investment is coming not only from the West, but also from the East. This past November, China Metallurgical Group won a major investment bid to develop and mine Afghanistan’s Aynak copper deposits. The Chinese firm will invest $3 billion into the region, which holds the world’s largest copper mines, estimated at 13 million tons of output. And last August, United Arab Emirates telecommunications firm Etisalat began operating in Afghanistan with an investment of $300 million. “We see a good opportunity in Afghanistan as mobile penetration is only 8 percent, leaving significant room for growth and development,” said Etisalat chief Mohammad Hassan Omran. Despite the Taliban insurgency, Afghanistan has enjoyed strong growth in trade with its neighbors. Trade with Iran, for instance, has increased from only $10 million a few years ago to nearly $500 million today. Trade with Pakistan has jumped from $30 million a year during the Taliban era to $1.4 billion annually now. The people of Afghanistan see these new opportunities as a way to rebuild their homeland. They are proud of their historical tradition of commerce and cultural exchange, dating back 2000 years, to the era of the Silk Road. With each economic opportunity that is fulfilled, the people of Afghanistan move closer to reconnecting with their heritage, and securing a good future for their country. Foreign investors can play a major role in helping them fulfill this goal.