Business & Investment in Afghanistan…the
Heart of Asia
Following five years of rebuilding efforts, Afghanistan has
finally begun to see the fruits of development in major cities
-- largely in part of the initiative of the private sector.
The Afghanistan Investment Support Agency (AISA), as a “one-stop
shop” for foreign and domestic investment licensing, reports
that 754 foreign companies from 25 countries have registered
investments valuing at $1.3 billion in various industrial sectors
in including telecommunications, transportation and logistics,
food processing, banking, tourism and trade. Of this, 70 have
been registered from the U.S., totaling $75 million in investment.
Turkey is, by far, the largest foreign investor
in Afghanistan followed by Germany, India and Pakistan. In terms
of industrial sectors, telecommunication is the biggest success
story, experiencing phenomenal growth and revolutionizing how
business is done in Afghanistan.
TELECOMMUNICATION
Afghan Wireless inaugurated GSM services in Kabul
in April 2002. Since then, the company has invested a total
of $75 million and employs 800. In late 2003 Afghan Wireless
completed a $14 million upgrade of its switching platform to
accommodate accelerating demand, utilizing a 100,000-line Siemens
switching platform that replaced smaller switches from the U.S.
vendor, Tecor. Afghan Wireless is 80 percent owned by Telecommunications
Systems International (TSI) of the United States and 20 percent
by the Afghan Ministry of Communications.
Roshan began operations in July 2003 with an initial
capital base of $55 million and plans a total investment of
$120 million. They provide coverage in Kabul, Herat, Kandahar,
Mazar-i-Sharif, Jalalabad and Kunduz. Roshan secured about 60,000
subscribers in the first six months of operations and subsequently
split a market of 662,500 subscribers with Afghan Wireless.
Roshan is a consortium, with a 51 percent stake by the Aga Khan
Foundation for Economic Development. Other shareholders include
Monaco Telecom International (35 percent); MCT, a U.S. telecom
holding company with networks in Central Asia (9 percent); and,
Alcatel (5 percent).
Areeba Afghanistan, the third private cell-phone
company in Afghanistan launched its services in Kabul, Mazar-i-Sharif,
Kandahar and Jalalabad in July 2006 with an investment of $140
million. The International Finance Corporation (IFC) of the
World Bank has a $45 million stake. The company is wholly owned
and managed by Investcom, an international provider of telecommunications
services listed on the London and Dubai stock exchanges. Areeba
Afghanistan plans to build a nationwide cellular network that
will provide mobile services throughout Afghanistan. The mobile
license awarded to Areeba Afghanistan requires the company to
provide 50 percent coverage of Kabul within six months of commencing
operation and 80 percent coverage of certain other major cities
within the first year of operation.
The Afghan Ministry of Communications announced
that a fourth company in the name of Etisalat would also start
operating shortly.
FOOD PROCESSING
Coca-Cola returned to Afghanistan after a 15-year
absence with an investment of $25 million on a bottling plant
and a water-purification facility. The company also had to build
a separate facility to produce the carbon dioxide gas needed
to make the drink carbonated and generate its own power for
the 60,000 square meter plant. Habib Gulzar International, the
franchisee of Coca-Cola in Afghanistan, expects to create 600
jobs, with the possibility of generating 8,000 more in allied
industries. Afghan-made Coca-Cola, Fanta and Sprite began distribution
in early 2006, servicing even regional markets in Central Asia
and cost marginally less than Coca-Cola imported from Pakistan
and Iran.
HOTELS
Tourism Promotion Services (Afghanistan) Ltd.,
a subsidiary of the Aga Khan Fund for Economic Development (AKFED),
invested $27.8 million (with a $7 million loan component from
the International Finance Corporation) to establish the Kabul
Serena Hotel by completely renovating and expanding the old
Kabul Hotel which was originally built in the 1930s. Serena
Hotels operates the five-star 160-room hotel.
BANKING
Da Afghanistan Bank has licensed 12 commercial
banks to date. Out of twelve, seven banks are full-fledged commercial
banks and the remaining five are branches of foreign banks.
The full-fledged commercial banks include: Bank-e-Millie Afghan
or National Bank (parastatal bank); Pashtany Tejarati Bank or
Pashtany Commercial Bank (parastatal bank); Export Promotion
Bank (parastatal bank); First Microfinance Bank (an Aga Khan/IFC
joint venture); Kabul Bank (a solely Afghan-owned bank); Afghanistan
International Bank (an ING-affiliated enterprise with American
equity); and, Arian Bank (joint venture of Bank-e-Mille “National
Bank” of Iran and Bank-e-Saderat “Export Bank”
of Iran). The branches of foreign banks include: Standard Chartered
Bank (UK); National Bank of Pakistan (Pakistan); Habib Bank
Limited (Pakistan); Punjab National Bank of India (India); and
Bank Alfalah Limited (Pakistan). There is a small number of
non-bank financial institutions (11 micro-finance institutions,
one credit union and one leasing company), but these institutions
meet only a small fraction of credit needs. There are no credit
bureaus or credit rating agencies.
Standard Chartered Bank of the United Kingdom
opened for business in Afghanistan in January 2004 with an initial
investment of $1.5 million. They are one of the pioneering banks
in Afghanistan that have introduced modern banking facilities
to the country. They aim to roll out full service facilities,
including automatic teller machines, internet banking and cash
management services in all 32 provinces. Currently, they cater
to more than 3,500 customers including both corporate and retail
clients.
The First Micro-Finance Bank of Afghanistan, with
a total investment is $3 million, is a full-service financial
institution providing both credit and savings products. It is
the first commercially sustainable micro-finance institution
in Afghanistan contributing to the development of micro-finance
as a viable and attractive commercial activity, and providing
financial services to the poor and underserved. The Aga Khan
Fund for Economic Development (AKFED) is majority shareholder
with the IFC taking a shareholding of 25 percent.
MINERALS AND MINING
Afghanistan’s mining industry offers a wealth of possibilities for the prospective investor, yet this lucrative sector is often overlooked by the global investment community. Although recent studies by the United States Geological Survey have determined that Afghanistan’s resource base is significantly greater than previously understood, the country’s mining sector remain virtually untouched. To read more about investment opportunities in this sector, click HERE
TRANSPORTATION AND LOGISTICS
DHL & FedEx have both begun operations since
2002. FedEx is represented in Afghanistan by a nominated Service
Contractor, Afghan Express Ltd., servicing Kabul, Kandahar and
Herat.
CONSTRUCTION
The Ministry of Mines and Industry announced in
July 2006 that four new private cement factories would be established
in the next three years to help fulfill 50 percent of Afghanistan’s
cement requirements of as much as eight million tons per year.
Two of the four have already been granted licenses: InvestCom
and Safi Brothers. InvestCom, slated to be the biggest private
cement factory, will be established in Pul-i-Khumri in two years
and will have a daily production output of 7,000 metric tons.
Safi Brothers will be established in Herat and will have a daily
production output of 3,500 metric tons. The Ministry of Mines
and Industry will award the remaining two licenses to operate
in Herat, Baghlan, Kandahar, Nangarhar and Bamyan to companies
with a minimum investment of $140 million.
INVESTING IN AFGHANISTAN: WHERE DO OPPORTUNITIES LIE?
In addition to AISA’s services to companies,
AISA also does worldwide Investment Promotion “road shows”,
traveling to major cities to educate the public on investment
opportunities in the country. In October 2005, AISA and the
Embassy of Afghanistan in Washington, DC, organized Investing
in Afghanistan…the Heart of Asia, the first ever investment
promotion tour in the United States. The second annual North
American tour is now scheduled to take place October 29 –
November 10, 2006 covering the cities of Washington, DC, New
York, Des Moines, Los Angeles and Toronto.
Another major achievement has been the creation
of the Afghanistan Reconstruction and Development Service (ARDS),
which handles procurement of Afghan Government funded projects.
Companies from around the world are welcome to register with
the ARDS to be placed on supplier lists and to receive procurement
and project notices. This open and transparent online system
has made offering goods and services for Afghan Government funded
projects much easier.
The Afghan Government has also worked with USAID
to establish three new industrial parks. These parks will offer
power, water, sewer and road connections that will allow investors
to establish factories, plants and offices. Lease inquiries
can be made to the Industrial Parks Development Authority (IPDA)
within AISA.
For additional information, please go to: www.afghanistan.business-gateways.com
REASONS TO INVEST IN AFGHANISTAN
As many companies who have already started projects
in Afghanistan have discovered, there are many business opportunities
in Afghanistan. Although there are many contracting opportunities,
investing in Afghanistan and its people is highly encouraged
and will lead to the creation of additional opportunities. You
may ask yourself, why invest in Afghanistan? Some of the major
reasons include that Afghanistan provides:
- One of the lowest custom tariffs in the region
- Streamlined procedures for business registration through AISA
- Low tax rates
- Low labor costs
- A growing domestic consumer market
- An opportunity to create employment for women
- An eager and committed work force
Some of the key sectors for investment include:
- Agriculture and agro processing
- Architectural, construction and engineering services
- Building and construction materials
- Power generation and transmission
- Oil and gas exploration
- Telecommunications
- Food processing
- Manufacturing
- Textiles and carpets
- Education services
- Consumer electronics
- Transportation
- Equipment and machinery sales and leasing
- Irrigation technology
- Leather and leather processing
- Precious and semi-precious stones
- Marble and other industrial stones
- Chemical and pharmaceutical products
LAWS
The Afghan government has been extremely proactive
in passing laws since 2001. Among them are the
Anti-Money
Laundering Law
Central
Bank Law
Environmental
Act
Hydrocarbons
Law
Income
Tax Law
Insurance
Law
Insurance
Amendment
Investment
Law
Minerals
Law
Tax Incentives
for Investors
CONCLUSION
With increasing stability and increasing investments
in roads, railways and air routes, entrepreneurs can trade not
only with Afghanistan, but also with Central and South Asia.
Already, goods are flowing from Central to South Asia, from
India to Iran and back.
Thus, by investing in Afghanistan, you are not only accessing
a market of 25 million, but a market of 150 million just in
the areas immediately surrounding Afghanistan.
The country’s developmental challenges are
many, but they are not insurmountable.
Security in some areas, lack of clarity regarding administrative
structure, and lack of information are just some of the challenges
that businesses may face. However, for those who are patient,
have a long-term plan and vision, and work with
Afghans to create partnerships, there are many opportunities
for successful enterprises and investments in Afghanistan.
By creating jobs and new business opportunities,
it gives the citizens of Afghanistan hope for their future.
Thus, your investment is not only a business venture, but
also an investment in regional and world stability.
